A bill introduced by a Senate committee would give the CFTC “exclusive oversight” of what it defines as a “digital commodity.”
The Digital Goods Consumer Protection Act of 2022, introduced by the Senate Agriculture Committee, sets definitions for the new class of goods, including Bitcoin And the Ethereum But except for financial instruments that are considered securities.
The legislation also requires brokers, custodians, merchants and businesses that deal in digital goods to register with the CFTC or face penalties. A similar bill introduced in the House of Representatives, the Digital Goods Exchange Act of 2020, made registration optional for exchanges.
Whether digital assets are classified as securities or as commodities, it has long been a regulatory quagmire for crypto companies. according to Divide one by one From the legislation, it amends the Commodity Exchange Act to include digital commodities without appearing to define the assets that make up the securities.
The Senate Committee said in a statement. “Without proper oversight, customers will remain vulnerable to fraud and manipulation, and market participants will lack the regulatory certainty needed for innovation and growth.”
In terms of jurisdiction, the CFTC will oversee transactions involving digital goods, except for those that result in the purchase or sale of goods and services. The bill also allows digital commodity platforms — brokers, custodians, dealers, and trading facilities — to register with the Securities and Exchange Commission.
Previous SEC administrations have said that both Bitcoin and Ethereum should be considered commodities, but the current president, Gary Gensler, has been less frank It rated Ethereum as such, and recently avoided the issue. The legislation just proposed could solidify Ethereum’s classification as a commodity if it becomes law.
One feature of the bill is to allow the Commodity Futures Trading Commission (CFTC) to charge a user fee on digital commodity platforms, which would fund control measures. The bill also seeks to outlaw abusive business practices, reporting conflicts of interest, and implement robust cybersecurity programs — requirements similar to those of traditional financial service providers.
The legislation would also require digital commodity platforms to create an environment of trust and transparency in financial markets, by publishing information about the commodities they deal with – such as trading volume and volatility – while adhering to specific advertising standards.
Finally, the CFTC will study the racial, ethnic, and gender demographics of those who participate in digital commodity markets as clients, with a view to funding education and outreach programs, under the proposed legislation.
Peter Van Valkenburg, director of research at the Coin Center for Industrial Research, has expressed general support for the legislation, but detailed warnings for some definitions may be too broad, according to a post on Currency Center website. Falkenberg wrote, “We greatly appreciate the goal of the legislation.”
He wrote that the bill’s benefits would be a more streamlined system of money transfer regulations than the current patchwork system for individual countries. In addition, there will be more protections for consumers, and the SEC will see less pressure to regulate non-trading exchanges.
The think tank disagreed with the legislation’s proposed definition of a digital commodity trader, stating that it “appears to include people who buy and sell cryptocurrency on their own.”
Also, the Coin Center statement notes that it does not seem fair to have individuals who write or publish software register with the CFTC, along with those who relay or verify transactions on networks.
“Mandatory registration of these activities will not overwhelm the innovative nature of these technologies with needlessly burdensome requirements, nor does it infringe our constitutional rights to speech and privacy,” Falkenberg wrote.
Stay up to date with cryptocurrency news, and get daily updates in your inbox.