Sens. Debbie Stabenow, D-Mich., Cory Booker, D-N.J., John Boozman, R-Ark., and John Thune, R-S.D., introduced legislation on August 4 that would create commodities-type regulation of some digital assets.
The Digital Commodities Consumer Protection Act of 2022 would give Federal financial regulatory agencies control over digital commodities. Specifically, it would give the Commodity Futures Trading Commission (CFTC) new tools and authorities to regulate digital commodities, and to safeguard markets and customers.
While proposing to carve out a big role for the CFTC in digital asset trading regulation, the bill’s sponsors said in a legislative summary that their proposal also “recognizes that other financial agencies have a role in regulating digital assets that are not commodities, but function more like securities or forms of payment.”
“As the number of Americans engaging with digital assets continues to grow, we must clarify and strengthen the regulation of our financial system,” said Sen. Booker in a statement. “This bipartisan legislation will enhance oversight over digital commodities, taking an important first step to ensure that the digital marketplace operates fairly with commonsense rules in place and protects consumers entering this market.”
The measure aims to reduce risks involved in brokering and buying digital assets through measures like maintaining transaction records and trading information, and requiring digital marketplaces to adopt adequate cybersecurity protections
“While digital assets were designed to make our financial system more accessible, their prices have been volatile, and hacks and other abuses on trading platforms have resulted in billions of dollars in losses,” the bill’s sponsors said in summary of the legislation. “Some of the most widely traded digital assets, like Bitcoin and Ether, are considered commodities and are largely bought and sold on trading platforms not subject to federal regulation.”
“As a result, these markets can lack the transparency and fairness that Americans expect from our financial system,” the bill summary says “Without appropriate oversight, customers will continue to be vulnerable to fraud and manipulation and market participants will lack the regulatory certainty necessary to innovate and grow.”
Additionally, the legislation would require digital commodity trading platforms to register with the CFTC and to maintain sufficient financial resources to operate – similar to “stress tests” conducted on banking institutions.
“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,” Sen. Boozman said.
As digital assets continue to rise in popularity and fluctuate in value amid minimal regulations, lawmakers in both the House and the Senate have continued to propose legislation to create new cryptocurrency regulations.
Earlier this year a group of bipartisan lawmakers in the house introduced the Digital Commodity Exchange Act of 2022 – introduced by Reps. Ro Khanna, D-Calif., Glenn Thompson, R-Pa., Tom Emmer, R-Minn., and Darren Soto, D-Fla. – to fill gaps between the CFTC and the Securities and Exchange Commission’s regulation of the digital asset marketplace.
Then in June, Sens. Kirsten Gillibrand, D-N.Y., and Cynthia Lummis, R-Wy., introduced the Responsible Financial Innovation Act to create a complete regulatory framework for digital assets including addressing the cyber aspect.
“One in five Americans have used or traded digital assets—but these markets lack the transparency and accountability that they expect from our financial system. Too often, this puts Americans’ hard-earned money at risk,” said Sen. Stabenow this week. “That’s why we are closing regulatory gaps and requiring that these markets operate under straightforward rules that protect customers and keep our financial system safe.”