A bipartisan bill proposed in the Senate named the Digital Commodities Consumer Protection Act was introduced in late July. This legislation clarifies that bitcoin and ether, two popular cryptocurrencies, are classified as commodities, as opposed to securities which are under SEC regulation. This bill makes no mention of other digital tokens or provide details for this classification.
Exchanges that allow investors to trade these two digital tokens must register with the CFTC.
While the SEC is still the majority regulating body of the crypto currency market, the bill doesn’t provide exactly what this division of responsibilities will look like.
The bill further adds new categories for registration such as “Digital Commodity Broker,” “Digital Commodity Custodian,” “Digital Commodity Dealer,” and “Digital Commodity Trading Facility.” Mining activity alone is not enough to trigger registration as a digital commodity platform, an issue raised in previous crypto law proposals.
According to Sen. John Boozman, R-Ark, a co-author of the bill along with Sen. Debbie Stabenow, D-Mich, “Digital assets and blockchain technology have already, and will continue, to change the way global markets function. This fast growing industry is currently governed largely by a patchwork of regulation at the state level.”
The Bill also commissions a report to look into racial, gender, and economic demographics of those using digital assets.
This legislation comes as a jurisdiction battle between CFTC and SEC plays out.
This bill is similar in language to the Responsible Financial Innovation Act introduced in June and sponsored by Sens Cynthia Lummis R-Wo and Kirsten Gillibrand, D-NY.
That legislation defined many crypto tokens as “ancillary assets,” or “intangible, fungible asset that is offered, sold, or otherwise provided to a person in connection with the purchase and sale of a security through an arrangement or scheme that constitutes an investment contract.”
This broader class of assets would fall under CFTC jurisdiction rather than SEC unless ruled otherwise by a court.
The next stage of the bill is assignment to committee and if it survives the “markup” stage, it will be debated and sent on to the House if passed.
We will keep you apprised of this situation as the bill progresses or stalls in Congress.