A bipartisan bill has been introduced by American lawmakers to give the country’s top commodity and currency trading regulator – the Commodity Futures Trading Commission (CFTC) – authority over the institutions that facilitate access to the crypto market.
The Digital Commodity Exchange Act seeks to classify crypto assets as commodities due to their fungibility – the ability of a good to be easily exchanged between market participants.
“The term ‘digital commodity’ means any form of fungible intangible personal property that can be exclusively possessed and transferred person to person without necessary reliance on an intermediary”, the bill cites.
If given this definition, regulating the crypto spot market would be the responsibility of the CFTC and that would prompt the institutions that currently issue these digital tokens and those that offer trading services to register and secure the appropriate licenses to operate in the space.
Moreover, the bill clarifies the specific characteristics that a digital commodity should possess to be considered as such.
“A fixed-value digital commodity shall be determined to be not readily susceptible to manipulation under this section if the issuer of the fixed-value digital commodity is registered as a fixed-value digital commodity operator or subject to comparable, comprehensive supervision and regulation by another Federal regulator or an appropriate government authority in the home country of the fixed-value digital commodity operator”, says a copy of the bill.
In addition, some of the requirements for an institution to be considered fit to facilitate these kinds of operations are outlined as well while the bill also identifies the actors that need to be involved to strengthen the ecosystem including custodians and a trustee in case the license of an operator is revoked.
Cryptocurrency issuers would have to be registered with the CFTC as well. This should increase the level of transparency in the marketplace as many projects whose founders are anonymous characters have ended up being fraudulent schemes.
“Regulatory clarity is critical for digital commodity markets to promote innovation and consumer protection. Innovators are spending up to fifty percent of start-up costs on legal fees because of the current regulatory ambiguity between what is a security and what is a commodity”, stated Representative (D) Darren Soto, who is co-sponsoring the bill along with Representatives Ro Khanna (D), Glenn Thompson (R) and Tom Emmer (R).
Meanwhile, Thompson stated: “Closing the spot-market gap is an essential piece of the regulatory puzzle, but more work remains. I look forward to working with my colleagues to bring greater clarity to crypto users and creators and I hope to see it move through the legislative process promptly”.
Moving forward, the bill needs to be approved in a hearing of the Agriculture Committee to then be passed by the House of Representatives. If that step is completed, it would move higher up the ladder to the Senate Agriculture Committee.
CFTC involvement and more regulation are not necessarily a bad thing
According to experts, cryptocurrency exchanges would be better off if they are regulated by the CFTC as that would reduce the red tape involved in securing a license in every state they wish to offer their services if classified otherwise.
That said, the scope of the law is to regulate the crypto spot market. In this regard, any other kinds of operations involving the offering of securities will have to go through the US Securities and Exchange Commission (SEC).
The Crypto Council for Innovation, an institution sponsored by some of the top names in the space such as Coinbase, Gemini, and Fidelity Digital Assets, made positive comments about the scope and reach of the bill.
In a tweet published earlier today, the institution commented: “Legislation that promotes sound #crypto policy and creates a new atmosphere of opportunity without stifling innovation is a step forward. This is one of a few bills introduced that the industry should watch closely”.
Crypto assets are highly volatile unregulated assets. Your capital is at risk.
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Source: Business 2 Community
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