New Bill Aims to Give CFTC More Power to Regulate Crypto Markets
Senate Agriculture Committee Chair Debbie Stabenow (D-MI) and Sen. John Boozman (R-AR) are proposing a new bill that would give the Commodity Futures Trading Commission (CFTC) more regulatory power to oversee crypto markets.
The bill would establish a national regulatory standard for crypto, define which tokens would fall under the category of digital products, and require all crypto trading platforms to register with the CFTC. Crypto players will be subject to the same rules as traditional financial brokers and trading platforms that facilitate trading in the commodity spot markets.
The bill amends the definition of a commodity to include “digital commodity,” which applies to certain cryptographic tokens. Bitcoin and ether, for example, are included in the definition of commodities while securities are excluded.
The bill also introduces new categories for digital commodity brokers, digital commodity custodians, digital commodity traders and requires them to register with the Commission.
“We are closing regulatory loopholes and requiring these markets to operate under simple rules that protect customers and keep our financial system safe,” Senator Stabenow said in a statement.
Under the legislation, crypto trading platforms would be required to monitor crypto trading and protect investors from abuse, as well as capture and publish trading information in a timely manner. Crypto brokers and dealers would be required to offer fair prices, keep records of all digital product transactions, create risk management systems, protect against cyberattacks, and provide information to the Commission on demand.
Crypto trading platforms should also disclose conflicts of interest and risks involved in trading crypto tokens.
“This fast-growing industry is currently governed largely by a patchwork of state-level regulations. It’s just not an effective way to protect consumers from fraud,” Sen. Boozman, the committee’s top Republican, said in a statement. “Our bill will give the CFTC exclusive jurisdiction over the spot market for digital products, leading to more safeguards for consumers, market integrity and innovation in the digital product space. .”
The bill notes that crypto miners would not have to register, noting that mining activity alone is not enough to trigger registration as a digital product platform.
The bill would also require the CFTC to produce a report investigating the energy consumption and energy sources used to create and transfer crypto tokens. The process of creating bitcoin has drawn the ire of some lawmakers given its power consumption.
Bitcoin consumes around 91 terawatt hours of electricity per year, more than Finland, a country of around 5.5 million people, according to the Cambridge Bitcoin Electricity Consumption Index. Cambridge also finds that the global CO2 emissions in 2021 for Ethereum and Bitcoin mining are equivalent to the tailpipe emissions of more than 15.5 million petrol cars on the road every year.
The legislation comes after CFTC Chairman Rostin Behnam, a former Stabenow aide who worked on the Senate Agriculture Committee, told the committee in February that the agency needed more authority. to properly regulate cryptography.
Specifically, Behnam testified that the agency has no authority to oversee the digital asset spot market, where he sees the most speculative behavior from retail investors, and leverage amplifies the decline in assets.
This is the second piece of legislation that would give the CFTC more power to be the primary regulator overseeing the crypto markets over the SEC.
A much more sprawling bill dubbed the Responsible Financial Innovation Act introduced in June by Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) would also make the crypto CFTC the primary regulator while defining how the use of a crypto token would classify it as a commodity or a security, as well as consumer protection and tax treatment.
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