Senate Agriculture Committee Chair Debbie Stabenow (D-MI) and Senator John Boozman (R-AR) are proposing a new bill that would give the Commodity Futures Trading Commission (CFTC) more regulatory authority to oversee crypto markets.
The bill would set a national regulatory standard for crypto, define which tokens would fall under the digital commodity category, and require all crypto trading platforms to register with the CFTC. Crypto players will be held to the same rules as traditional financial brokers and trading platforms that facilitate trading in commodities spot markets.
The bill amends the definition of a commodity to include “digital commodity,” which applies to some crypto tokens. Bitcoin and ether, for example, are included in the definition of commodities while securities are excluded.
The bill also introduces new categories for digital commodity brokers, digital commodity custodians, digital commodity dealers, and requires them to register with the Commission.
“We are closing regulatory gaps and requiring that these markets operate under straightforward rules that protect customers and keep our financial system safe,” Senator Stabenow said in a statement.
Under the legislation, crypto trading platforms would be required to monitor crypto trading and protect investors from abuse, and capture and publish trading information in a timely manner. Crypto brokers and dealers would be required to offer fair prices, keep records of all digital commodity transactions, create risk management systems, safeguard against cyberattacks, and provide information to the Commission upon request.
Crypto trading platforms would also have to disclose conflicts of interest and the risks of trading crypto tokens.
“This fast-growing industry is currently governed largely by a patchwork of regulations at the state level. That simply is not an effective way to protect consumers from fraud,” Senator Boozman, the committee’s top Republican, said in a statement. “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.”
The bill notes crypto miners would not have to register, noting that mining activity alone is not sufficient to trigger registration as a digital commodity platform.
The bill would also require the CFTC to conduct a report studying the energy consumption and sources of energy used to create and transfer crypto tokens. The process of creating bitcoin has caught the ire of some lawmakers given its energy consumption.
Bitcoin consumes around 91 terawatt-hours of electricity annually, more than is used by Finland, a nation of about 5.5 million, according to Cambridge Bitcoin Electricity Consumption Index. Cambridge also finds global 2021 CO2 emissions for Ethereum and Bitcoin mining is equivalent to the tailpipe emissions from more than 15.5 million gasoline powered cars on the road every year.
The legislation comes after CFTC Chair, Rostin Behnam, a former Stabenow aide who worked on the Senate Agriculture Committee, testified before the committee in February that the agency needs more authority to properly regulate crypto.
Specifically, Behnam testified that the agency has no authority to oversee the cash market for digital assets, where he sees the most speculative behavior from retail investors, and leverage magnifies asset declines.
This is the second piece of legislation that would give the CFTC more power to be the primary regulator to oversee crypto markets over the SEC.
A much more sprawling bill dubbed the Responsible Financial Innovation Act introduced in June by Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) would also make the CFTC crypto’s primary regulator while defining how a crypto token’s use would classify it as a commodity or security, along with consumer protections and tax treatment.
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