Congress likely to decide fate of cryptocurrency jurisdiction: Lummis executive

An executive for United States Senator Cynthia Lummis believes that the US Congress should step in and resolve the dispute between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) over who regulates cryptocurrencies, if the issue cannot be resolved internally.

The issue dates back to 2014 when the CFTC for the first time claimed jurisdiction over virtual currencies. This was later confirmed by a US Federal Court decision 2018, which stated that the CFTC had jurisdiction to prosecute criminals for fraud cases involving virtual currencies. However, the SEC has been primarily investigating US-based crypto exchanges and crypto assets to date.

On August 3, Senators Debbie Stabenow (Michigan) and John Boozman (Arkansas) introduced the Digital Goods Consumer Protection Act of 2022 (DCCPA). If the bill is passed by the US legislature, the CFTC will be given rights to regulate digital products.

More specifically, the DCCPA will classify both Bitcoin (BTC) and Ether (ETH) as digital commodities rather than securities. This is especially important because SEC Chairman Gary Gensler recently said in an interview with US business news channel CNBC that BTC is the only cryptocurrency he is comfortable labeling as a commodity:

“Some, like Bitcoin — and that’s all I’m going to say because I’m not going to talk about any of these tokens, but my predecessors and others have said it’s a commodity.”

But despite the tension, Lummis’ staff believes the DCCPA bill has less than a 50% chance of passing this year:

“The only way any bill will pass this year is if a catastrophic black swan event, such as a major stock market crash in the US, could rally lawmakers.”

The news comes after the start of the SEC investigating the $20 billion Coinbase crypto exchange, but Lummis staff also said that every US-based crypto exchange is under investigation in some form.

Related: Coinbase SEC investigation could have ‘serious and chilling’ results: Lawyer

Under US law, the Howie The test determines whether a transaction is an investment (security) contract. The test states that an investment contract exists “when there is an investment of money in a joint venture with a reasonable expectation that profits will result from the efforts of others.”

If ETH, or any crypto asset for that matter, is found to fall under this definition, then US-based crypto exchanges will be illegally trading securities. The SEC recently classified nine crypto-assets as securities.