If the SEC and CFTC are unable to resolve the matter, the United States Congress would decide who gets bragging rights over crypto regulation.
If the conflict between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) regarding who regulates crypto cannot be resolved internally, United States Senator Cynthia Lummis staffer believes that the U.S. Congress will have to intervene and resolve the issue.
The problem dates back to 2014, the year the CFTC initially claimed authority over virtual currency. This was subsequently confirmed by a 2018 decision by the U.S. Federal Court, which held that the CFTC had the authority to bring criminal charges in connection with fraud cases utilizing virtual currencies. To now, the SEC has been primarily looking into cryptocurrency exchanges and assets with a U.S. base.
The Digital Commodities Consumer Protection Act of 2022 was introduced on August 3 by Senators Debbie Stabenow of Michigan and John Boozman of Arkansas (DCCPA). The CFTC would be given authority to control digital commodities if the bill is signed into law by the US Congress.
The DCCPA would classify both Bitcoin (BTC) and Ether (ETH) as digital commodities rather than securities, which is particularly noteworthy. This is particularly relevant because SEC Chairman Gary Gensler recently stated that BTC is the only cryptocurrency he is comfortable classifying as a commodity in an interview with the American business news channel CNBC:
“Some, like Bitcoin — and that’s the only one I’m going to say because I’m not going to talk about any one of these tokens, but my predecessors and others have said they’re a commodity.”
However, despite the conflict, the DCCPA bill’s staffer believes that this year’s chances of passage are fewer than 50%:
“The only way either bill would pass this year is if a catastrophic black swan event, like a major U.S. exchange collapsing, could rally lawmakers.”
The news comes after the SEC started looking into the $20 billion cryptocurrency exchange Coinbase, but Lummis’ worker also claimed that every American-based cryptocurrency exchange is currently the subject of some sort of investigation.
The Howey test is used by American law to assess whether a transaction qualifies as an investment contract (security). According to the criteria, an investment contract occurs “where money is invested in a joint company with a reasonable expectation of gains to be obtained from others’ labor.”
If it is determined that ETH, or any other crypto asset for that matter, fits these criteria, then U.S.-based crypto exchanges would be dealing securities illegally. Nine crypto assets were been added to the SEC’s list of securities.
