US lawmakers are stepping up their efforts to provide the crypto industry with a regulatory framework. A new bipartisan bill introduced by US Senators Debbie Stabenow, John Boozman, Cory Booker and John Thune is another step in that direction.
The legislators was introduced the Digital Goods Consumer Protection Act of 2022 and introduced a new regulatory term: digital goods. These assets will fall under the jurisdiction of the US Commodity Futures Trading Commission (CFTC).
This regulator will have the “power to regulate the trading of digital commodities”, introduce rules for market participants and enforce them. The bill proposes that “digital commodity platforms” should be held to “the same standards as traditional financial institutions.”
Cryptocurrencies have often been rejected by lawmakers and regulators and classified as illegal assets. This new bill appears to recognize the role of digital assets and suggests that they should be regulated as other assets in the legacy financial system.
Senator Stabenow had the following to say about the potential impact of this act and why they felt compelled to reduce the regulatory “loopholes” in the country:
One in five Americans have used or traded digital assets — but these markets lack the transparency and accountability they expect from our financial system. All too often, this puts Americans’ hard-earned money at risk. That’s why we’re closing regulatory loopholes and requiring these markets to operate with simple rules that protect customers and keep our financial system safe.
In the crypto industry, companies are asking for regulatory clarity and a legal framework to operate under US rules. The CFTC seems more willing to have a conversation with companies in the industry than the Securities and Exchange Commission (SEC).
The Gary Gensler-led regulator has exercised a mandate from “enforcement” as operators believe their practices do not match their talk. The SEC has invited crypto companies to report and engage in dialogue, but those efforts have been met with legal action.
SEC Commissioner Hester Peirce believes the regulator decided to shift its approach from “careful and considered” in favor of “imposing hasty and sweeping change”. This often leads companies in the digital asset sector to try to get even with the SEC.
Why the crypto industry needs federal regulation
The senators believe that US crypto investors need a federal regulatory framework, especially as the sector continues to expand. Otherwise, lawmakers believe that state-level regulations may not “ensure” consumer protection.
The bill would require companies to register with the CFTC, prevent “abusive trade practices,” incorporate “advertising standards, disclose information about the potential risk of trading in digital commodities,” and more.
US Senator Boozman added the following regarding the growing relevance of digital assets and their potential impact on the financial sector:
Digital assets and blockchain technology have already, and will continue to, change the way global markets operate. However, this fast-growing industry is currently largely governed by a patchwork of state-level regulations. This is simply not an effective way to protect consumers from fraud.
Sam Bankman Fried (SBF) CEO at major crypto exchange FTX most welcome legislation and celebrated the efforts announced by US Senators. On Twitter, he called the bill a “strong” effort to “provide clear federal oversight” of the nascent asset class.
However, crypto users noted that the bill would require companies to register with the CFTC and the lack of clarity about the term “digital commodity,” which cryptocurrencies would be regulated by the CFTC and which by the SEC?
2/ in short: the bill would require mandatory CFTC registration and oversight of “digital commodity platforms”. It is similar to the House DCEA and our 2018 call for a CFTC alternative to state MTL. However, we are still concerned about overreach/unintended impact on developers and users.
— Peter Van Valkenburgh (@valkenburgh) August 3, 2022