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New crypto oversight legislation arrives in Washington as industry shakes

A bipartisan group of senators on Wednesday proposed a bill to regulate cryptocurrencies, the latest attempt by the United States Congress to formulate ideas on how to oversee a multibillion-dollar industry that has been racked by collapsing prices and lenders halting operations.

The regulations offered by Senate Agriculture Committee chair Debbie Stabenow and top Republican member John Boozman would authorise the Commodities Futures Trading Commission, CFTC, to be the default regulator for cryptocurrencies. That would be in contrast with bills proposed by other members of Congress and consumer advocates, who have suggested giving the authority to the US Securities and Exchange Commission.

This year, crypto investors have seen prices plunge and companies crater with fortunes and jobs disappearing overnight, and some firms have been accused by federal regulators of running an illegal securities exchange. Bitcoin, the largest digital asset, trades at a fraction of its all-time high, down from more than US$68,000 in November 2021 to about US$23,000 on Wednesday. Industry leaders have referred to this period as a “crypto winter”, and lawmakers have been desperate to implement stringent oversight.

The bill by Stabenow, a Democrat from Michigan, and Boozman, of Arkansas, would require all cryptocurrency platforms – including traders, dealers, brokers and sites that hold crypto for customers – to register with the CFTC.

The CFTC is historically an underfunded and much smaller regulator than the SEC, which has armies of investigators to look at potential wrongdoing. The bill attempts to alleviate these issues by imposing on the crypto industry user fees, which in turn would fund more robust supervision of the industry by the CFTC.

“Our bill will empower the CFTC with exclusive jurisdiction over the digital commodities spot market, which will lead to more safeguards for consumers, market integrity and innovation in the digital commodities space,” Boozman said in a statement.

Senators Cory Booker, D-New Jersey, and John Thune, R-South Dakota, are co-sponsors of the bill.

“It’s critical that the (CFTC) has the proper tools to regulate this growing market,” Thune said.

The legislation can be added to the list of proposals that have come out of Congress this year.

Senator Pat Toomey, R-Pennsylvania, in April introduced legislation, called the Stablecoin TRUST Act, that would create a framework to regulate stablecoins, which have seen massive losses this year. Stablecoins are a type of cryptocurrency pegged to a specific value, usually the US dollar, another currency or gold.

Additionally, in June, Senator Kirsten Gillibrand, D-New York, and Senator Cynthia Lummis, R-Wyoming, proposed a wide-ranging bill, called the Responsible Financial Innovation Act. That bill proposed legal definitions of digital assets and virtual currencies; would require the IRS to adopt guidance on merchant acceptance of digital assets and charitable contributions; and would make a distinction between digital assets that are commodities and those that are securities, which has not been done.

Along with the Toomey legislation and the Lummis-Gillibrand legislation, a proposal is being worked out in the House Financial Services Committee, though those negotiations have stalled.

Committee chair Maxine Waters, D-California, said last month that while she, top Republican member Patrick McHenry of North Carolina and Treasury Secretary Janet Yellen had made considerable progress towards an agreement on the legislation, “we are unfortunately not there yet, and will therefore continue our negotiations over the August recess”.

President Joe Biden’s working group on financial markets last November issued a report calling on Congress to pass legislation that would regulate stablecoins, and Biden earlier this year issued an executive order calling on a variety of agencies to look at ways to regulate digital assets.


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