US Lawmakers Reintroduce CFTC Crypto Spot Market Oversight Bill

US lawmakers have reintroduced a bill that would give the Commodity Futures Trading Commission (CFTC) more authority to regulate cryptocurrency spot markets. The Digital Commodity Exchange Act would give the regulator direct oversight of some types of crypto transactions and exchanges.

The Digital Commodity Exchange Act was first introduced in the Senate in December 2018 by Senators Mike Crapo and Sherrod Brown. The bill would amend the Commodity Exchange Act to include coverage of digital commodities and would give the CFTC additional oversight powers.

The bill also calls for information sharing with other U.S. financial regulators as well as external agencies such as the Financial Action Task Force (FATF). This is designed to prevent money laundering and to ensure that all crypto assets comply with the rules set by FATF. The new version of the bill would give crypto assets a more secure legal status.

As lawmakers continue to grapple with the growing presence of cryptocurrencies and blockchain in the global financial system, some have been pushing for greater regulation of this emerging market. The bill was proposed by a collection of bipartisan U.S. lawmakers.

The Digital Commodity Exchange Act of 2022 (DCEA), was introduced on Thursday by representatives Glenn Thompson (R-Pa.), Ro Khanna (D-Calif.) Tom Emmer (R-Minn.) and Darren Soto (D-Fla.). The vill would create a definition for “digital commodity” and allow the CFTC to oversee companies issuing or letting people trade these types of tokens while having the Securities and Exchange Commission (SEC) continue to oversee tokens that fall under U.S. securities laws.

The current version of the DCEA was introduced just days after President Biden ‘s administration signaled it would take a hands-off approach to regulate cryptocurrencies.

“This bill will provide much-needed regulatory clarity for cryptocurrency exchanges and ensure strong protections for investors,” Thompson said in a statement. “This bipartisan, bicameral legislation will give the CFTC the tools it needs to police bad actors without stifling innovation in this important space.”

The DCEA would also create a new class of commodities called “digital assets” and direct the CFTC to issue regulations for spot markets trading digital assets. “The term ‘digital commodity’ means any form of fungible intangible personal property that can be exclusively possessed and transferred person to person without necessary reliance on an intermediary,” a copy of the bill said.

The definition of the digital commodity would not include any equity or debt interests, or securities. What this means is that the SEC would continue to enjoy its own oversight over aspects of the crypto market.

The bill defines a “digital asset” as “any digital unit of account that has been designed to replace physical property or that intends, or has the ability, to be used as a medium of exchange.”

These digital commodities could only be sold on a CFTC-registered exchange, which would have to abide by certain requirements which include holding customers’ crypto in qualified custodians, safeguarding customer assets and preventing commingling customer and corporate funds, according to the bill.

During a March hearing with CFTC Chair Rostin Behnam, Thompson announced that he was continuing to work on the bill. In a statement following Thursday’s proposal Thompson said the bill was “a culmination of years of work.”

“Closing the spot-market gap is an essential piece of the regulatory puzzle, but more work remains. I look forward to working with my colleagues to bring greater clarity to crypto users and creators and I hope to see it move through the legislative process promptly,” he said.

Khanna, a co-sponsor, said, “To foster American innovation and tech job growth, Congress must establish a clear process for creating and trading digital commodities that prioritizes consumer protection, transparency, and accountability.”

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