But by giving primary responsibility for crypto oversight to the CFTC, the relatively small agency tasked with regulating a swath of financial markets, from grain futures to more complex products, the bill — set for introduction Tuesday — sidelines the SEC, whose chair, Gary Gensler, has taken an aggressive posture toward crypto interests.
Gensler argues that most digital assets in the roughly $1.2 trillion market qualify as securities, similar to stock in publicly-traded companies, giving his agency the responsibility to police them and their issuers.
The bill from Lummis and Gillibrand rejects that claim, asserting instead that “most digital assets are much more similar to commodities than securities,” a joint news release from the senators’ offices said.
The CFTC already regulates futures contracts for bitcoin and ethereum, the two most popular cryptocurrencies. But the new proposal gives the agency broad new power by handing it oversight of the crypto spot market as well — and envisions that market including a wide array of digital coins. The bill would create a process for crypto trading platforms such as Coinbase to register with the CFTC.
“The United States is the global financial leader, and to ensure the next generation of Americans enjoys greater opportunity, it is critical to integrate digital assets into existing law and to harness the efficiency and transparency of this asset class while addressing risk,” Lummis said in a statement.
Gillibrand added the bill “will establish a regulatory framework that spurs innovation, develops clear standards, defines appropriate jurisdictional boundaries and protects consumers.”
Advocates of tougher crypto regulation argue investors stand to suffer if lawmakers sideline the SEC.
“The status quo would be better than this bill,” said Todd Phillips, director of financial regulation and corporate governance at the liberal think tank Center for American Progress. “So many of these tokens are securities and need to comply with the regular, usual securities laws, and this bill tries to create a special crypto-specific disclosure regime that I don’t think discloses all the information investors need to fully evaluate whether to purchase a security.”
Crypto industry sources said they expect the bill’s introduction to kick off a prolonged legislative process, one that will almost certainly extend into next year and likely result in major revisions.
Heads of crypto lobbying groups nevertheless praised the unveiling of a measure the industry has worked for months to shape behind the scenes.
The bill “represents a milestone moment for crypto policy and a major step forward for the crypto industry in Washington,” Blockchain Association executive director Kristin Smith said. Perianne Boring, chief executive of the Chamber for Digital Commerce, called it a “foundational, comprehensive start.” And Sheila Warren, chief executive of the Crypto Council for Innovation, said the bill amounts to “a significant step forward. The crypto community has called for greater regulatory clarity, and we look forward to continuing to collaborate with policymakers across the political spectrum in the next stages of discussion and work ahead.”
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