Senators reveal plans for bipartisan crypto bill that expands CFTC authority

Leaders of the Senate Agriculture Committee revealed at a July 10 hearing that they’re working on bipartisan legislation to grant the Commodity Futures Trading Commission authority over the digital commodity market.

“The interconnection between crypto and traditional financial markets is increasing, but the trading of spot digital commodities like bitcoin and ether are not overseen by any federal regulator,” said Committee Chair Debbie Stabenow, D-Mich., in her opening remarks.

“This is why I've been working so closely with Sen. Boozman to advance bipartisan legislation that will give the CFTC regulatory authority over digital commodities,” Stabenow continued, giving recognition to Sen. John Boozman, R-Ark., who serves as the committee’s top Republican. “We're working to have specific language to members by the end of the week for your review.”

In August 2022, Stabenow and Boozman introduced a bill along with committee members Sen. Cory Booker, D-N.J., and Sen. John Thune, R-S.D., which would have granted the same authority to the CFTC. That bill, known as the Digital Commodities Consumer Protection Act of 2022, or DCCPA, did not move, after cryptocurrency-related efforts in Congress stalled following the collapse of crypto exchange FTX.

CFTC Chair Rostin Behnam, who served as the sole witness at the hearing, told lawmakers that currently “there is no direct federal regulatory oversight” for crypto assets that are not securities, such as bitcoin.

“This leaves this giant gap, this vacuum, and ultimately customers at risk for loss of money,” Behnam said.

Behnam told Booker that in order to oversee the digital commodity market, the agency needs to be able to register exchanges, custodians and broker-dealers, and “within that registration scheme are a whole number of core principles around compliance with governance, compliance with the board of directors, financial resources, eliminating conflicts of interest — all of these very typical things that have been built and evolved over decades in the financial regulatory space.”

“It's really not rocket science, and a lot of it is built off the DCCPA, with some modifications,” Behnam added.

Stabenow said any legislation the committee advances should focus on three main pillars: applying the same rules to crypto that are applied to traditional financial markets, protecting retail customers through sufficient disclosure, and ensuring “adequate permanent funding for the CFTC to oversee the digital commodity market.”

Behnam said that to set up a regulatory regime, based on the CFTC’s estimates, the agency would need $30 million in the first year and $50 million in the second.

The committee’s efforts to develop digital asset legislation follow the May passage of a landmark crypto bill in the House. That bill would give the CFTC new oversight of the digital commodities market while also designating the Securities and Exchange Commission as the regulator for the digital securities market. It also calls on both the SEC and CFTC to propose joint rule-makings on the issue and allows digital asset intermediaries to dually register with the agencies.