Sam Bankman-Fried (SBF) was criticized last week when a leaked draft of crypto legislation showed a controversial clause that would put a lot of restrictions on DeFi.
The first big news from the leaked draft is the idea that crypto should be regulated by the Commodity Futures Trading Commission (CFTC) instead of the Securities and Exchanges Commission (SEC). This is one of the core ideas that SBF has been pushing for a long time. Jill E. Sommers, who used to be the head of the CFTC, is also on the board of FTX US.
Debbie Stabenow and John Boozman, who are both paid by SBF, brought the Digital Commodities Consumer Protection Act, the draft bill that was leaked, to the Senate. Jake Chervinsky, who is in charge of policy at the Blockchain Association, liked the bill, especially because it says that Bitcoin and Ethereum are commodities. But he also says that the definition of a “Digital Commodity” is too broad so the SEC can still argue that cryptocurrencies should be called securities.
Chervinsky also says that the definition of a “Digital Commodity Platform” could lead to an unintended ban on DeFi because it can be used against anyone who uses DeFi protocols. This means that retail traders would be regulated as if they were exchanges.
There are also parts of the bill that tell the CFTC to look into decentralized protocols and come up with ways to protect consumers from fraud and scams. In a tweet from yesterday, SBF talked more about how important it is to protect consumers. It said that the customer should be told about the risks and that gatekeeping should be based on how well they understand the product. This would likely be done through a quiz or test to see how much a client knows.
His knowledge-based gatekeeping principle is also explained in a recent blog post that lists his proposed standards for cryptography.
At the moment, SBF gives more money to politicians than anyone else in the crypto industry. He has also managed to position himself as a key industry reference point in the legislative process. So far this year, he has given away more than $40 million, but he is still a long way from the $1 billion he promised.
SBF says it appreciates the pushback
Last week, when he put out his Possible Digital Asset Industry Standards, the billionaire with curly hair caused a stir. SBF called the blog post “a set of standards that we as an industry could use to make things clear and keep customers safe while we wait for full federal regulatory regimes.” He also referred to it as an “industry normas manual.”
During the draft, SBF dealt with everything from blocking sanctioned addresses to giving hackers a cut of stolen crypto to deciding whether to list an asset as security and regulating stablecoins.
Even though he tried hard, the proposal didn’t go over very well, and SBF was accused of putting the U.S. position in the crypto race at risk. Yesterday, the FTX boss responded to the criticism. He thanked the community for its (sometimes severe) feedback and revealed that he’s amended the proposal.
“Huge thanks to everyone who gave constructive feedback, comments, and criticism, especially @ErikVoorhees and @RyanSAdams, but there are too many others to name,” he tweeted.
“I’ve changed my post a few times already and will keep doing so.”
These revisions include clarification of how he sees his proposed changes impacting the DeFi space in particular.
“It doesn’t say what DeFi developers, smart contracts, or validators have to do,” he said. “It’s looking to eventually establish guidelines about how e.g. FTX’s platform—or Fidelity’s—could interface with DeFi contracts.
“This gets right what the infrastructure bill a while ago got wrong: that devs and validators aren’t platforms, and shouldn’t be regulated as such. Which is a huge improvement!”
