Bill Giving CFTC Crypto Powers May Go to Vote This Year

by Arthur · July 20, 2022

Bitcoin could soon see new legislation that would define the asset class as a commodity, leaving behind years of legal uncertainty.

A bipartisan congressional effort to give authority over the crypto industry to the Commodities and Futures Trading Commission — as opposed to the Securities and Exchange Commission, which has historically held sway over the industry — could go to a vote as soon as this year ends. , according to Sen. Kirsten Gillibrand (D-NY), a co-sponsor of the bill who spoke at this year’s Bloomberg Crypto Summit.

“The Agriculture Committee is in the process of finalizing its bipartisan portion of the bill,” Gillibrand said Bloomberg on Tuesday. The New York senator added that there was “serious common ground.”

Recent chaos in the crypto markets, she added, has created “further interest” among senators concerned about investor protection and a lack of proper “oversight and accountability.”

The bill, entitled Act on responsible financial innovationis sponsored by Gillibrand and Sen. Cynthia Lummis (R-WY) and will go before the Congressional Agriculture Committee, which oversees commodity markets because of its historic role in grain futures markets.

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Make Bitcoin, crypto a commodity

The bill is hugely popular in the cryptocurrency industry and proposes to effectively disenfranchise the SEC – which has long disagreed with the legal status of most cryptocurrencies, resulting in years of legal gray area.

Under the new bill, “fungible digital assets that are not securities” would be classified as commodities – unlike securities, commodities are subject to fewer restrictions on who can invest. The definition of a security, according to the century-old Howey test, is an asset in which an “expectation of profit” arises from the work of a distinct third party.

Crypto lobbyists argue that digital tokens do not fall under this rubric and should be regulated more like grain or gold.

The bill would also include “linked assets” — tokens that are only partially decentralized but still do not meet the criteria of the Howey test — under the CFTC’s jurisdiction, but would require them to make certain additional disclosures.

But while Bitcoin is generally agreed to be a commodity, Gillibrand said, there is still considerable debate about which other cryptocurrencies fall into that category.

“The question of what else qualifies as a commodity and what else qualifies as a security, we have a pretty robust definition that we worked with the SEC staff on, and we worked with industry experts on, to make sure that we really refine that definition so there may be clarity,” Gillibrand said. “I think where the debate will be is what fits into what definition — but that’s exactly what we want the regulators to do.”

Senators look at stablecoins

Other parts of the bill that propose increased supervision of stable coinsincluded in the wake of Terra’s spectacular collapse earlier this year, will likely go to a vote next year, Gillibrand said.

She said this was partly due to the complexity of the topic and relative newness to a large number of senators.

“It’s a big and sweeping topic, and it’s still new to a lot of U.S. senators, and it’s a lot for them to digest with the few weeks we have left in this calendar year,” Lummis said. She added that many senators were not yet able to tell the difference between “payment stablecoins” and “algorithmic stablecoins.”

From changing who regulates crypto, targeting stablecoins, and even throwing in cybersecurity regulations, the latest bill could dramatically reorganize how the industry moves forward. And given the years of uncertainty, guardrails for the industry may be just what the doctor ordered.