US Bipartisan Bill Gives CFTC Powers to Regulate Exchanges, Stablecoins

On April 28, a bipartisan group of lawmakers in Washington, D.C. introduced an updated bill to regulate cryptocurrency developers, traders, exchanges and stablecoin providers, placing them before the U.S. Commodity Futures Trading Commission (CFTC). under regulatory control.

Republican Reps. Glenn Thompson and Tom Emmer, backed by Democratic cosponsors Darren Soto and Ro Khanna, resubmitted the Digital Commodity Exchange Act (DCEA) of 2022 to Congress. .

The updated version includes a section covering stablecoin providers who can register as “fixed-value digital commodity operators.” These operators would be obliged to share how the stablecoin works, keep records for regulators and provide information on the assets backing the “fixed-value digital commodity” and how they are secured.

Under the latest bill, the DCEA will authorize the CFTC to register and regulate cryptocurrency exchanges that offer spot trading of encrypted commodities, that is, exchanges that allow traders to buy cryptocurrencies at current prices.

The DCEA will not affect the U.S. Securities and Exchange Commission’s (SEC) regulatory authority over the issuance of digital asset securities, but instead classifies non-securities cryptocurrencies as digital commodities, regulated by the CFTC.

Crypto exchanges are subject to the same rules as other commodity providers when listing new cryptocurrencies on their platforms. Exchanges must demonstrate that cryptocurrencies are “susceptible to manipulation” by analyzing their mechanisms, such as “purpose, function, governance structure, distribution and participation.”

Developers of cryptocurrencies can also voluntarily register with the CFTC and make disclosures in accordance with public trading and exchange listing requirements. The bill’s summary says the registration will ensure the accuracy of records and standardization of public information about cryptocurrencies and help facilitate listings on public exchanges.

Regulatory uncertainty has affected cryptocurrency businesses operating in the U.S., and the co-sponsors of the bill said in a press release that it will help ease the general uncertainty surrounding the current rules, Soto said:

“Regulatory transparency is critical for digital goods markets to foster innovation and protect consumers. With current regulatory ambiguity about what is a security and what is a commodity, innovators spend up to 50% of their start-up costs on legal fees.”

Industry advocacy group the Crypto Council for Innovation called the bill a “step forward” because it creates “a new climate of opportunity without stifling innovation,” adding:

"This is one of the few bills that the industry should be watching closely."

In February, CFTC Chairman Rostin Behnam told lawmakers at a Senate hearing on digital assets that the commission does not have the authority to enforce the crypto space because of different regulations.

Behnam called the crypto space "an essentially unregulated market," and said the CFTC's gaining more regulatory powers "will only allow us to see what's going on behind the scenes."

The bill will need to go to the Agriculture Committee for a hearing, and if passed by the House, it will be discussed by the Senate Agriculture Committee.