Bipartisan bill to give CFTC authority over exchanges and stablecoins
A bipartisan group of lawmakers in D.C. introduced an updated bill on April 28 to regulate cryptocurrency developers, dealers, exchanges, and stablecoin providers, bringing them under the regulatory control of the United States Commodity Futures Trading Commission (CFTC).
The Digital Commodity Exchange Act of 2022 (DCEA) was re-introduced to Congress by Republican Representatives Glenn Thompson and Tom Emmer with support from Democrat co-sponsors Darren Soto and Ro Khanna.
The updated version includes a section covering stablecoin providers, who can register as a “fixed-value digital commodity operator.” These operators would be obligated to share how the stablecoin operates, retaining records for the regulator along with providing information on the assets backing the “fixed-value digital commodity” and how they’re secured.
As per the last bill, the DCEA would authorize the CFTC to register and regulate cryptocurrency exchanges that offer spot trading of crypto commodities — those that allow traders to buy cryptocurrencies at the current price.
The DCEA would not affect the Securities and Exchange Commission’s (SEC) regulatory power over digital asset securities offerings, but instead classify cryptocurrencies that are not securities as digital commodities to be brought under regulation by the CFTC.
Crypto exchanges would also be subject to the same rules as other commodity providers for listing new cryptocurrencies on their platforms. Exchanges must demonstrate the crypto is “not readily susceptible to manipulation” through analyzing its mechanics such as its “purpose, functionality, governance structure, distribution, and participation.”
Developers of cryptocurrencies could also voluntarily register with the CFTC and make disclosures required for public trading and listing on an exchange. A summary of the act says registration would ensure accuracy of records and public information about the crypto is standardized and could help facilitate public exchange listings.
Regulatory uncertainty has afflicted cryptocurrency businesses operating in the U.S.,and in a release the co-sponsors of the bill said it would help with easing the prevailing uncertainty of the current rules, with Soto saying:
“Regulatory clarity is critical for digital commodity markets to promote innovation and consumer protection. Innovators are spending up to fifty percent of start-up costs on legal fees because of the current regulatory ambiguity between what is a security and what is a commodity.”
Industry advocacy body the Crypto Council for Innovation called the bill “a step forward” as it creates a “new atmosphere of opportunity without stifling innovation” adding:
“This is one of a few bills introduced that the industry should watch closely.”
In February, CFTC chair Rostin Behnam told lawmakers during a Senate hearing on digital assets that the Commission had a lack of authority to enforce the crypto space due to differing regulations.
Behnam called the crypto space “in essence…an unregulated market” and said more regulatory authority for the CFTC “will only allow us to see what’s going on underneath the hood.”
The bill will need to move forward to a hearing by the Agriculture Committee, if passed by the House, it will be then taken up by the Senate Agriculture Committee for discussion.