New bill aims to give CFTC more authority to regulate crypto markets
Senate Agriculture Committee Chair Debbie Stabenow (D-MI) and Senator John Boozman (R-AR) are proposing a new bill that would give the Commodity Futures Trading Commission (CFTC) more regulatory authority to oversee crypto markets.
The bill would set a national regulatory standard for crypto, define which tokens fall under the category of digital goods, and require all crypto trading platforms to register with the CFTC. Crypto players will be held to the same rules as traditional financial brokers and trading platforms that facilitate trading in commodity spot markets.
The bill changes the definition of a good to include “digital good”, which applies to some crypto-tokens. For example, Bitcoin and Ether are included in the definition of commodities while securities are excluded.
The bill also introduces new categories for digital commodity brokers, digital commodity managers, digital commodity dealers, 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.
According to the legislation, crypto trading platforms will be required to monitor crypto trading and protect investors from abuse, and capture and publish trade information in a timely manner. Crypto brokers and dealers will be required to offer fair prices, keep records of all digital commodity transactions, create risk management systems, protect against cyber attacks and provide information to the commission upon request.
Crypto trading platforms will also have to disclose conflicts of interest and the risks of trading crypto tokens.
“This fast-growing industry is currently governed largely by a patchwork of regulations at the state level. That is simply not an effective way to protect consumers from fraud,” Senator Boozman, the committee’s top Republican, said in a statement. “Our bill will give the CFTC exclusive jurisdiction over the digital commodity spot market, which will lead to more safeguards for consumers, market integrity and innovation in the digital commodity space.”
The bill notes that crypto miners do not need to register, and notes that mining activity alone is not sufficient to trigger registration as a digital goods platform.
The bill would also require the CFTC to conduct a report studying the energy consumption and energy sources used to create and transfer crypto tokens. The process of creating bitcoin has caught the ire of some lawmakers given the energy consumption.
Bitcoin consumes about 91 terawatt hours of electricity annually, more than is used by Finland, a nation of about 5.5 million, according to the Cambridge Bitcoin Electricity Consumption Index. Cambridge also finds that global 2021 CO2 emissions for Ethereum and Bitcoin mining are equivalent to the tailpipe emissions of more than 15.5 million gasoline-powered cars on the road each year.
The legislation comes after CFTC Chairman Rostin Behnam, a former Stabenow aide who worked on the Senate Agriculture Committee, testified before the committee in February that the agency needs more authority to properly regulate crypto.
Specifically, Behnam testified that the agency has no authority to monitor the cash market for digital assets, where he sees the most speculative behavior by retail investors, and leverage magnifies declines in value.
This is the second piece of legislation that would give the CFTC more power to be the primary regulator to oversee crypto markets over the SEC.
A much more comprehensive bill called the Responsible Financial Innovation Act introduced in June by Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) would also make the CFTC crypto’s primary regulator while defining how the use of a crypto token would classify it as a commodity or security, together with consumer protection and tax treatment.
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