The US Senate wants to take the crypto regulatory power of the SEC and put it in the hands of the CFTC, which the lawmaking body views as much better for the market.
During the U.S. Congressmen on August 3, a new bill was proposed under a joint agreement of four Senators from the Senate Agriculture Committee.
The proposal indicates that the Senators want the Commodity Futures Trading Commission (CFTC) to regulate crypto, instead of the SEC.
Cryptos as a Commodity
The Commodity Futures Trading Commission (CFTC), which was founded in 1974, seeks to establish a transparent, competitive, and financially secure market that can reduce all kinds of risks while safeguarding both consumers’ interests and the integrity of the U.S. economy.
Under the draft “The Digital Commodities Consumer Protection Act of 2022,” crypto assets will have a legal definition while their trading activities will be under the supervision of the CFTC.
The two leading digital currencies – Bitcoin (BTC) and Ethereum (ETH) – will also be listed as a “commodity asset” rather than a security, following the recent string of controversies over which cryptocurrencies should be banned or considered securities.
The CFTC will be entitled to treat any crypto asset as a “commodity,” as long as it is not vetoed by the Securities and Exchange Commission (SEC).
Will There be Any Impact?
How could this move affect the crypto asset space?
If the CFTC is given more authority to regulate the crypto market, then instead of operating under the laws of each state, cryptocurrency exchanges will be subject to federal regulations or oversight requirements.
Because there is no specific federal license, the majority of cryptocurrency exchanges are currently subject to state laws.
Also, digital commodities under federal oversight will have a clear definition, which would help businesses understand when and how to launch and list cryptocurrencies with the CFTC or the SEC.
This is the latest attempt by US lawmakers to respond to a call to bring cryptocurrencies into the legal framework proposed by US President Joe Biden through an executive order in February.
In June 2022, Senator Cynthia Lummis submitted a draft crypto-regulatory law that she declared comprehensive, covering aspects such as exchange management, stablecoin issuers, relationships between CTFC – SEC, and investor protection measures, DeFi, and DAOs, etc.
Some Regulations Would Be Fine…
Following the collapse of the old LUNA token (LUNC) and stablecoin UST, many major overlays quickly responded to the application and made a set of rules for the entire crypto market.
America is not an exception. Senator Pat Toomey, a supporter of the stablecoin bill, said at the CoinDesk Consensus 2022 event that the lack of transparency in regulations is a major barrier to innovation in the field of cryptocurrencies.
The failure of the LUNA/UST cryptocurrency exchange has been used as evidence to support the establishment of a legal passageway for the cryptocurrency market.
In a different scenario on the same day, another group of Parliamentarians, including Senators Lummis and Senators Pat Toomey, the two officials who are most interested in the cryptocurrency sector, submitted an amendment to the article on the “crypto broker” taxation under the infrastructure act of 2021.
Signed off by President Biden, the law says that “crypto brokers” who handle crypto transactions worth at least $10,000 must report their activities to the U.S. Internal Revenue Service and pay their taxes (IRS). The law, however, doesn’t give a clear definition of “crypto broker.”
The law only defines “broker” as any entity offering services related to the crypto transfer.
Based on that definition, all parties are subject to reporting crypto users’ tax information. But this is impossible since all transactions in the crypto space are private and there is no way to break down countless daily transactions. The authorities are pushed to redefine “crypto broker.”
Under the amendment, crypto brokers will exclude – first, those who are only involved in the process of verifying transactions on the distributed ledger and do not perform any other functions or offer any other services (this refers to nodes and miners).
Secondly, vendors selling software or hardware whose primary purpose is to enable the storage of users’ private keys for the purpose of gaining access to digital assets via a distributed ledger (referring to software developers) would also be omitted.
The USA has lagged in the area of crypto regulations, it is time to change that.