A bipartisan group of senators proposed new crypto oversight legislation on Wednesday. The bill, which would regulate cryptocurrencies, is the latest attempt by the U.S. government to bring oversight to a multibillion-dollar industry. With lenders stopping operations and prices plummeting, it’s hard to say how the community will receive the news.
The Background
Presented by Debbie Stabenow, Senate Agricultural Committee chair, and John Boozman, top Republican member, the proposed regulations would allow the Commodities Future Trading Commission (CFTC) to become the default regulator for digital assets. This runs in contrast to bills proposed by other members of Congress as well as consumer advocates. Both of these groups tend to suggest providing the Securities and Exchange Commission (SEC) with this authority.
Over the course of 2022 thus far, investors have seen plunging prices and cratering companies. In some cases, jobs and entire fortunes evaporate overnight. Moreover, some firms face accusations of running illegal operations, such as their own securities exchange.
Bitcoin, which continues to be the largest digital asset, now trades at a fraction of the all-time high it tapped in November 2021. When this news broke on Wednesday, BTC traded around $23,000.
Within the community, investors and leaders refer to it as a “crypto winter.” Throughout this time, lawmakers have seemed desperate to enact strict oversight.
The Proposed Bill
So, what does this new crypto oversight legislation say? The bill would require every cryptocurrency platform, from traders and brokers to sites that hold assets for customers, to register with the CFTC.
Historically, the CFTC is a smaller, underfunded regulator when compared to the SEC. The SEC has its own army of investigators ready to explore potential wrongdoing. However, the bill seeks to alleviate this issue by imposing fees on users within the crypto industry.
These fees would allow the CFTC to fund more robust supervision across the industry.
“Our bill will empower the CFTC with exclusive jurisdiction over the digital commodities spot market, which will lead to more safeguards for consumers, market integrity, and innovation in the digital commodities space,” Boozman stated.
Senators John Thune, R-South Dakota, and Cory Booker, D-New Jersey, have co-sponsored the bill. In his own statement, Thune said, “It’s critical that the (CFTC) has the proper tools to regulate this growing market.”
Other Attempts at Crypto Oversight Legislation
This new piece of crypto oversight legislation is just one on a list of proposals put forward by Congress throughout the year.
In April, Senator Pat Toomey, R-Pennsylvania, introduced a bill called the Stablecoin TRUST Act. Toomey’s proposals would develop a framework that regulates stablecoins, which have also seen massive losses in 2022.
For the uninitiated, a stablecoin is a crypto asset tied to a specific value. Typically, this is the U.S. dollar, gold, or some other form of currency.
In June, Senators Lummis, R-Wyoming, and Gillibrand, D-New York, proposed the Responsible Financial Innovation Act. This wide-ranging bill proposed several key actions.
- Specific legal definitions for virtual currencies and digital assets
- Guidance adopted by the IRS for merchant acceptance and charitable contributions of digital assets
- Defining the distinction between digital assets that are securities and those that are commodities
Alongside the legislation proposed by both Lummis-Gillibrand and Toomey, there is a proposal in the works by the House Financial Services Committee. However, it seems the negotiations there have stalled.
Last month, Committee chair Maxine Waters stated that while some members had made progress toward an agreement, it simply wasn’t solidified yet. They planned to continue negotiations throughout August.
In November 2021, President Biden’s working group on financial markets issued a report. The group called on Congress to pass legislation to regulate stablecoins. Earlier this year, Biden also issued an executive order that called on various agencies to explore options to regulate digital assets.
