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The leader of the Senate Agriculture Committee Specification On August 3, the Commodity Futures Trading Commission (CFTC) will become the primary regulator of commodity digital assets.
The CFTC currently regulates derivatives markets such as futures and swaps, but not underlying commodities.
According to the bill, the CFTC will have exclusive jurisdiction over cryptocurrencies that qualify as commodities. The bill proposes to amend the definition of “goods” in the Commodity Exchange Act to include “digital goods.” This includes his two largest cryptocurrencies, Bitcoin (BTC) and Ethereum (ETH), and other tokens that are not considered securities.
By law, the CFTC oversees all digital goods transactions unless the digital assets are used solely for the purpose of buying or selling goods or services.
The Digital Goods Consumer Protection Act of 2022 will require all cryptocurrency companies dealing in digital goods to register with the CFTC. The bill proposes to register brokers, custodians and trading platforms in separate categories, but mining companies are not required to register.
The bill would also require cryptocurrency trading firms to disclose certain information about digital goods contracts posted on their platforms. According to the bill, this includes the product’s operating structure and systems, trading volume and volatility.
The law allows the CFTC to set rules governing margined, leveraged, or funded digital commodity trading, as well as to ensure fraud prevention. The Commission is also entrusted with developing rules for consumer protection, such as requiring trading companies to disclose conflicts of interest, articulating material risks, and setting standards for marketing such platforms.
Amid growing concerns about the energy consumption of digital assets, the CFTC should keep up-to-date reports on the amount of energy used to create and transfer assets, as well as the energy sources. According to the bill, the European Commission will be required to publish energy consumption reports on its website.
While the Securities and Exchange Commission (SEC) is vying for the role of supreme regulatory authority for cryptocurrencies, the new bill would allow CFTC-registered crypto platforms to be registered with securities regulators as well.
The Senate Agriculture Committee, which introduced the bill, Asked CFTC will provide more guidance on digital assets in January.
At a hearing before the same committee in February, CFTC Chairman Rostin Behnam called on lawmakers to introduce legislation that would give the committee the power to regulate the physical market for certain cryptocurrencies. The current bill isn’t far off, but it’s a step in the same direction.
Industry think tank Coin Center endorsed the bill in a blog post, but warned:
When registration is mandatory rather than voluntary, there is a serious risk of overreach and unintended consequences.
Coin Center also warned that the current definition of a dealer in the bill is too broad and should be made clearer to ensure regular buyers and sellers of cryptocurrencies are also not swept into the registration system. I warned that wording was needed.
It is worth noting that the cryptocurrency industry is desperate for a clear definition of digital commodities and digital securities. This will clarify which cryptocurrency platform should be registered with which authority (CFTC or SEC). However, while the new bill does define “digital goods,” the industry will have to wait for a definition to figure out which digital assets are securities.
