Whether “Digital Commodities Consumer Protection Act of 2022” (DCCPA) gets passed in 2023 and begins a sea change – or stems a flood – of distributed ledger technology within the U.S. financial system remains to be seen.
But on Wednesday, Senator Debbie Stabenow (D, MI) and Senator John Boozman (R, AR) appear to be aggressive about being first to get legislation passed in the crypto arena. By introducing the streamlined DCCPA, the lionshare of cryptocurrency oversight as measured by crypto market capitalization – Bitcoin and Ethereum – is given to the Commodity Futures Trading Commission (CFTC). This fulfills the previously-stated wishes of CFTC Chair Rostin Behnam, who issued a statement strongly supporting the bill on Wednesday and is a former Stabenow staffer.
Senator Boozman, who is Ranking Member of the Senate Ag Committee, was unequivocal in a call with reporters this week saying,“This is not a marker bill. (…) This is something we want to get done.” Boozman and Stabenow, Senate Ag’s Chair, first intimated such a bill would be on its way from their Committee back in early June.
Co-sponsors of DCCPA are Senators Cory Booker (D, NJ) and John Thune (R, SD). Senator Booker has been previously mentioned by fellow Ag Committee member Senator Kirsten Gillibrand (D, NY) as a possible co-sponsor of the Responsible Financial Innovation Act.
Get the details on DCCPA:
The new bill is positioned publicly as protecting consumers and the U.S. financial system.
In describing DCCPA in the press release, Senator Stabenow said, “… we are closing regulatory gaps and requiring that these markets operate under straightforward rules that protect customers and keep our financial system safe.” These strong guardrails could also benefit growth of blockchain tech and cryptocurrency in the financial world and, importantly, supercharge this type of innovation in the United States.
Quoting that industry advocates prefer the CFTC, the Washington Post noted, “(…) the regulator would give them friendlier treatment than the SEC, where Chair Gary Gensler has taken an aggressive public line toward the industry” – namely, regulating by enforcement.
Budget
As the bill outlines, funding from fees – such as requiring registration of exchanges – will allow the CFTC to grow its budget and properly manage the space. The CFTC budget and headcount is approximately 1/6th the size of the Securities and Exchange Commission (SEC) in 2022.
From the FY 2023 President’s Budget Report (PDF) from the CFTC:
“The Commission is requesting a total of $365.0 million and 759 FTE for FY 2023. The request for its operational budget for FY 2023 is a 9.9 percent increase above the FY 2022 President’s Budget and allows the Commission to maintain and enhance its role and capabilities as the primary regulator of the U.S. futures, swaps, and options markets.”
From the FY 2023 Budget Justification (PDF) presented by the SEC:
“The SEC requests $2.149 billion in support of 5,261 positions and 4,808 full-time equivalents..”
Presumably, the CFTC’s organization which includes 13 operating divisions and offices will either get a 14th division/office or perhaps some divisions will get a crypto “arm.”
Definitions
In that this potentially is the first big blockchain-related bill to pass through Congress, definitions abound in the bill such as:
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- “Defines ‘digital commodity,’ which includes Bitcoin and Ether and excludes certain financial instruments including securities;”
- “Amends the definition of ‘commodity’ in the Commodity Exchange Act (‘Act’) to include ‘digital commodity.'”
- “Introduces new categories of registration including ‘digital commodity broker,’ ‘digital commodity custodian,’ ‘digital commodity dealer,’ ‘digital commodity trading facility'”
The Securites and Exchange Commission gets a nod in the one-pager which says the bill “recognizes that other financial agencies have a role in regulating digital assets that are not commodities, but function more like securities or forms of payment.” Also, crypto energy consumption critics might like the bill’s requirement to review and report on energy use connected to cryptocurrency activities such as mining.
SRO
A self-regulatory body will be formed to help manage the industry. From the bill’s overview:
“Requires digital commodity brokers, digital commodity
custodians, and digital commodity dealers to be members of a registered futures association (“RFA”) and authorizes the Commission to delegate registration functions to an RFA.
Given the depth and complexity of the crypto industry, a public-private partnership of sorts makes sense in the form of a self-regulatory organization.
DCCPA vs RFIA
Finally, a key difference between DCCPA and the Lummis-Gillibrand RFIA bill is covered by legal website JD Supra:
“Unlike the Lummis-Gillibrand bill, DCCPA does not address in detail instruments that would otherwise qualify as securities and would be regulated by the Securities and Exchange Commission or as banking products and would be regulated by state or federal bank regulators.”
Leaner means faster passage – potentially – as the remaining 2022 Congressional calendar combines with fall elections to slow policymaking.