CFTC, not SEC, would regulate crypto industry under Lummis, Gillibrand bill

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A long-awaited Senate proposal to subject federal oversight to the free cryptocurrency industry would give the sector a victory by empowering its preferred regulator, the Commodity Futures Trading Commission (CFTC), over the Stock and Securities Commission.

The sponsors of the bill, Senators Cynthia M. Lummis (R-Wyo.) And Kirsten Gillibrand (DN.Y.), present it as the first serious effort to apply comprehensive regulation to the cryptographic industry, which has coined a new class of billionaires and promised to reinvent financial services while generating scams and eliminating investments that triggered alarms from regulators.

But by giving the CFTC the primary responsibility for overseeing cryptocurrencies, the relatively small agency responsible for regulating a range of financial markets, from grain futures to more complex products, the bill, which was introduced on Tuesday, leaves out the SEC, whose president, Gary Gensler. , has taken an aggressive stance towards cryptographic interests.

Gensler argues that most digital assets in the market of about $ 1.2 trillion qualify as securities, similar to the shares of listed companies, which gives his agency the responsibility to control them and their issuers. .

Lummis and Gillibrand’s bill rejects that claim, stating instead that “most digital assets are much more like commodities than securities,” a joint press release from the senators’ offices said. Senatorial aides said they worked with both SEC and CFTC staff on the language of the bill, and Lummis, in an interview Tuesday morning on CNBC, said he would meet with Gensler later Tuesday to discuss the matter. An SEC spokesman declined to comment.

The CFTC already regulates futures contracts for bitcoin and ethereum, the two most popular cryptocurrencies. But the new proposal would give the agency more power by also overseeing the spot cryptocurrency market and envisages that market including a wide variety of digital currencies. The bill would create a process for cryptographic trading platforms like Coinbase to register with the CFTC.

“The United States is the world’s financial leader, and to ensure that the next generation of Americans enjoy greater opportunities, it is critical to integrate digital assets into existing legislation and leverage the efficiency and transparency of this asset class while addressing risk.” said Lummis. in a statement.

Gillibrand added that the bill “will establish a regulatory framework that encourages innovation, develops clear standards, defines appropriate jurisdictional boundaries, and protects consumers.”

The CFTC is much smaller than the SEC, with about a sixth of its budget. The bill, dubbed the Responsible Financial Innovation Act, would address that resource gap by allowing the CFTC to assess a fee to the companies it oversees. However, proponents of tougher cryptocurrency regulation argue that investors may suffer if the SEC is forced to take a back seat.

“The status quo would be better than this bill,” said Todd Phillips, director of financial regulation and corporate governance at the liberal think tank Center for American Progress. “Many of these tokens are securities and must comply with the usual and customary value laws, and this bill seeks to create a special cryptocurrency-specific disclosure regime that I don’t think will reveal all the information investors need to fully assess whether they should buy a guarantee “.

Sources in the cryptography industry have said they expect the introduction of the bill to start a lengthy legislative process, which will almost certainly be extended to next year and is likely to result in major revisions. At least four Senate committees could claim jurisdiction over parts of the measure.

However, the heads of the cryptographic lobby groups praised the presentation of a proposal that the industry worked for months to shape behind the scenes.

The bill “represents a milestone for cryptographic policy and a major step forward for the cryptographic industry in Washington,” said Blockchain Association Executive Director Kristin Smith. Perianne Boring, executive director of the Digital Chamber of Commerce, described it as a “fundamental and comprehensive start”. And Sheila Warren, executive director of the Crypto Council for Innovation, said the bill was “a significant step forward. of discussion and work ahead.

The measure includes a number of other provisions, including changes in the tax treatment of crypto and a study of its environmental impact. The bill would exempt cryptocurrency holders from paying capital gains taxes when they use digital assets to make purchases below $ 200.

It would also require issuers of stable currencies (cryptocurrencies linked to a traditional financial asset, such as the dollar) to hold reserves that fully support their digital assets, to avoid a collapse like the recent land grab, which attempted to use complex financial resources. engineering to preserve its price.

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