Coinbase ‘Highly Supportive’ of Giving CFTC Exclusive Jurisdiction Over Bitcoin, Ethereum

Talk of crypto policy in the US tends to revolve around rumblings from the Securities and Exchange Commission and taxes.

But there are two bills in Congress that have largely flown under the radar, at least to people outside the political wonk crowd. They would crucially give the Commodities Futures Trading Commission more power. Also, they received a solid recommendation from Coinbase Head of US Policy Kara Calvert.

“We very much support two measures, one in the House, one in the Senate, that would give the CFTC spot authority. It’s by Senators Stabenow and Boozman, and Representatives Thompson and Khanna in the House,” Calvert said Decrypt during an interview at the Messari Mainnet conference in New York.

Having spot authority would mean the CFTC monitors real-time trading on crypto exchanges, such as when someone buys Bitcoin with US dollars or trades Ethereum for a token on Coinbase or FTX.

The CFTC already shares regulatory oversight of derivative products, such as futures, with the SEC.

Futures are a type of investment product that allows traders to bet on whether an asset’s price will go up or down at a later date. And they have been increasingly popular with crypto investors. Actually crypto exchanges Crypto.com, Coinbase, and FTX have all been vocal whenever they bought companies with existing CFTC licenses.

The distinction between spot and futures trading – and which regulator has jurisdiction over them – has been important.

As recently as yesterday, SEC Chairman Gary Gensler made the case that the vast majority of crypto assets qualify as securities and that exchanges should be required to register with the SEC.

“Given that most crypto tokens are securities, it follows that many crypto intermediaries trade in securities and must register with the Securities and Exchange Commission (SEC) in some capacity,” he said in a statement ahead of the Financial Stability Oversight Council meeting.

He later added that there is a possibility that “crypto intermediaries,” such as exchanges, may need to register with both the SEC and the CFTC. But the two bills Calvert flagged both specify that the CFTC would have exclusive jurisdiction over “digital goods.”

“These bills are trying to get to the heart of, what is a non-security, and how do we regulate it in a smart way that allows for innovation,” Calvert said.

There has been much hand-wringing in crypto over the so-called Howey test, a four-part assessment that regulators and courts use to determine whether an asset qualifies as a security under US federal law. Over the summer, in a complaint against a former Coinbase employee accused of insider tradingrevealed the SEC that it believes at least nine assets that were traded on Coinbase are unregistered securities, which would mean that both Coinbase and the issuers of the assets could be in violation of federal law.

Sens. Debbie Stabenow (D-MI) and John Boozman (R-AR) introduced theirs Digital Commodities Consumer Protection Act of 2022 in August. The bill very pointedly calls Bitcoin and Ethereum “digital goods,” as opposed to securities, and says the CFTC would have exclusive jurisdiction over them.

After the introduction of the bill, Washington Post reported Boozman said on a press conference that he has heard from the crypto industry that they “almost universally” prefer to be regulated by the CFTC.

The bill also states that the CFTC’s jurisdiction would not include crypto transactions for goods and services, such as using Bitcoin to buy a cup of coffee. Stabenow and Boozman’s bill was last discussed in the Senate Agriculture and Banking Committees on September 15, but there have been no amendments or new versions.

In the House of Representatives, Representatives Ro Khanna (D-CA), Glenn Thompson (R-PA), Tom Emmer (R-MN) and Darren Soto (D-FL) have a similar bill pending, Digital Commodity Exchange Act of 2022. It was introduced in April, then referred to the Subcommittee on Commodity Exchanges in early May.

The House bill, like its Senate counterpart, would update the Commodity Exchange Act to define digital goods as “any form or exchangeable intangible personal property that can be solely owned and transferred from person to person without necessarily relying on an intermediary” and give the CFTC sole jurisdiction over their regulation.

Blockchain Association CEO Kristin Smith said she is also watching the two bills that would clarify the CFTC’s role in regulating crypto.

“The commodity spot market, there’s a lot of work going on behind the scenes right now,” Smith said Decrypt during the Mainnet conference.

She is more optimistic The TRUST Actintroduced in March by Sen. Pat Toomey (R-Pa.), which would set up rules for stablecoin issuers.

“The stablecoin looks really good,” Smith said.

The a short legal text will require centralized issuers, such as Tether and Circle, to back their stablecoins with fiat currency or high-quality government securities maturing in 12 months or less. It also requires issuers to publish reports on their reserves every 30 days. So far, there has been no further action on the stablecoin bill.