The Digital Commodity Exchange Act would empower the commodities regulator to set rules for cryptocurrency developers and crypto exchanges that offer spot trading.
On April 28, a bipartisan group of lawmakers in Washington, D.C. introduced an updated bill to regulate cryptocurrency developers, dealers, exchanges, and stablecoin providers, bringing them under the jurisdiction of the US Commodity Futures Trading Commission (CFTC).
Republican Representatives Glenn Thompson and Tom Emmer reintroduced the Digital Commodity Exchange Act of 2022 (DCEA) to Congress, with Democratic co-sponsors Darren Soto and Ro Khanna joining them.
A section on stablecoin providers, who can register as a “fixed-value digital commodity operator,” has been added to the updated version. These operators would be required to share information about how the stablecoin works, keep records for the regulator, and provide information about the assets backing the “fixed-value digital commodity” and how they are secured.
According to the previous bill, the DCEA would allow the CFTC to register and regulate cryptocurrency exchanges that provide spot trading of crypto commodities — that is, those that allow traders to buy cryptocurrencies at the current price.
The DCEA would not affect the Securities and Exchange Commission’s (SEC) regulatory authority over digital asset securities offerings, but would instead classify cryptocurrencies that are not securities as digital commodities subject to CFTC regulation.
For listing new cryptocurrencies on their platforms, cryptocurrency exchanges would be subject to the same rules as other commodity providers. Exchanges must demonstrate that the cryptocurrency is “not easily manipulable” by examining its mechanics such as its “purpose, functionality, governance structure, distribution, and participation.”
Cryptocurrency developers could also voluntarily register with the CFTC and make the disclosures required for public trading and exchange listing. According to a summary of the act, registration would ensure the accuracy of records and public information about the cryptocurrency is standardized, which could aid in the facilitation of public exchange listings.
Regulatory uncertainty has afflicted cryptocurrency businesses operating in the United States, and the bill’s co-sponsors said in a release that it would help to alleviate the prevailing uncertainty of the current rules, with Soto saying:
“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.”
The Crypto Council for Innovation, an industry advocacy group, called the bill a “step forward” because it creates a “new atmosphere of opportunity without stifling innovation,” adding:
“This is one of a few bills introduced that the industry should watch closely.”
During a Senate hearing on digital assets in February, CFTC chair Rostin Behnam told lawmakers that the Commission lacked the authority to enforce the crypto space due to differing regulations.
Behnam described the crypto space as “essentially…an unregulated market,” adding that more CFTC regulatory authority “will only allow us to see what’s going on underneath the hood.”
The bill will need to be heard by the Agriculture Committee, and if passed by the House, it will be taken up for discussion by the Senate Agriculture Committee.
