Tag: DCEA

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Predictions for 2023 Blockchain Legislation in the U.S. Congress

Predictions for the blockchain industry

Washington D.C.’s population is inflating again with the commencement of the 118th Congress and there’s no better time to prognosticate on the blockchain legislation possibilities in 2023.

With the humiliation wrought by Sam Bankman-Fried (SBF) and FTX burned into the Congressional record (1, 2, 3) in 2022, action would appear imminent one way or another.

Let’s predict…

Was DCCPA

The Digital Commodity Consumer Protection Act (DCCPA) from Senate Agriculture Chairwoman and Senator Debbie Stabenow (D, MI) and Ranking Member and Senator John Boozman (R, AR) was in the pole position for new crypto law in the U.S. But with FTX founder and CEO Sam-Bankman Fried’s fingerprints all over this legislation through his congressional collaboration last year, DCCPA looks radioactive.

So, in spite of the theatrics of a December Senate Agriculture hearing where everyone including Commodity Futures Tradiing Commission Chair Rostin Behnam tried to distance themselves from FTX while still professing support for DCCPA, there’s no way forward for the bill.

Enter a re-purposing of DCCPA that will continue to address jurisdiction of the Bitcoin and Ether cash markets by the CFTC.  But, even this bill will be met with skepticism given the SBF connection and his mugshot continuing to clog the mainstream and social media airwaves.

RFIA boost

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Senate Ag Committee Attempts To Resuscitate DCCPA, Distance From FTX

Senate Ag hearing

With the collapse of cryptocurrency exchange FTX not even a month old, the first FTX hearing commenced on Capitol Hill with the Senate Agriculture Committee questioning Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam yesterday in Washington D.C.

Overall, the hearing seemed to be a theater of positioning by Senate Ag intended to address…

    • Urgency – Senate Ag and the CFTC appeared to believe the Digital Commodity Consumer Protection Act (DCCPA) has more urgency than ever in light of the FTX collapse.
    • Overcoming the conflict of interest – Senate Ag and the CFTC endeavored to distance themselves from FTX and its founder Sam Bankman-Fried (SBF). The unspoken message is that FTX did not influence the creation of the DCCPA. On that note – and grasping for transparency, for example – CFTC Chair Behnam’s calendar in the past year was under the microscope which included 10 FTX meetings largely related to its subsidiary LedgerX and its DCO application – not DCCPA.
    • Refinement– Chair Rostin Behnam and Committee members urged that learnings from FTX’s implosion be incorporated into the new bill. In some ways, the refinement appears to be finding a way to bring companies like FTX onshore, which would have required the company to adhere to regulations that would have prevented the implosion in the first place.
    • Pause – In spite of the urgency, the need for refinement requires pause. DCCPA won’t be heading for a vote on the Committee or Senate floor until next year at the earliest. Chair Behnam advocated as much.

Hearing context

On its face, D.C. appears to be in soul-searching mode as it gropes for answers on how the FTX collapse occurred even though the company was based in the Bahamas. The krux of the concern, though, stems from the humiliation endured by unsuspecting lawmakers who had been courted and cajoled by FTX founder and CEO Sam Bankman-Fried.

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FTX Implosion May Be The Catalyst for Fast-Tracking Legislation

Yesterday, Binance, the largest global cryptocurrency exchange, acquired FTX’s global exchange after its founder and CEO Sam Bankman-Fried appeared to have knowingly parked unbacked, illiquid assets on a sister company’s balance sheet – the stuff regulators warn about – which brought FTX to near-insolvency.

As a result, Bankman-Fried did the only thing he could which was to sell FTX to his competitor.

It’s not a good look for crypto and its legislative champions. On the other hand, if you’re rooting for new regulation, this may be what forces Congress’ hand. Guardrails are needed ASAP if consumers are going to be protected and the industry is going to flourish.

The damage

Is the impact from this bigger than the Terra Luna stablecoin debacle in the Spring? Probably.

First, let’s review the “soft” impact…

Sam Bankman-Fried was arguably the most popular industry figure in Washington D.C., appearing multiple times in front of Congressional committees in spite of his global company’s Bahamian address. Now, his name and reputation have taken a devastating hit affecting relationships with the CFTC and Congress especially as it relates to the feedback he was providing on crypto derivatives changes and the Stabenow-Boozman Digital Consumer Commodity Protection Act (DCCPA) coming out of the Senate Ag committee.

Undoubtedly, SBF’s (as Sam Bankman-Fried is colloquially known) actions were damaging to the crypto industry itself which was already dealing with multiple scandals,  hacks and “rugs” making DC power players wonder if crypto is a positive, world-changing innovation or just a fleeting ponzi scheme that allows SEC Chair Gary Gensler to say, “I told you so.”

Moreover, the financial damage wrought by the enormous blunder is still unknown. Are all customer funds safe? Maybe. Seems so. What about FTX’s billions in funds? Likely not. How about FTX’s investors? They’re definitely holding the bag.

One important qualifier in this mess is that FTX.us (the carve out within FTX which deals with US business) will remain independent from the Binance deal meaning Bankman-Fried is still in the game, so to speak – at least for now – until another shoe drops.

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