CFTC regime’s blueprint on crypto exchanges enters Congress

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Congressman Glenn Thompson released the Digital Commodities Exchange Act.

Rather than presenting his bill on the ground, Thompson preferred to open a project to public comment, he told The Block in an interview.

If I had operated in a typical Congressional fashion, we would have abandoned it and issued a press release. But I want to make sure we get the best, said Thompson, the top Republican on the House agriculture committee.

The bill would establish a new regulatory regime for cryptocurrency trading at the Commodity Futures Trading Commission. Currently, the spot markets do not have a federal regulator in the United States, although this is a controversial subject.

Gary Gensler, chairman of the Securities and Exchange Commission, argued that custodian crypto exchanges already fall under existing securities laws, which subjects them to stock exchange regulation that has more stringent rules than oversight of securities. the CFTC. Rostin Behnam, chosen by President Bidens to lead the CFTC, has publicly indicated the wish that the CFTC retain and even expand these authorities.

However, the CFTC generally does not have a regulatory regime with execution and reporting expectations for the spot commodity markets. In the cash markets, it is generally limited to law enforcement against fraud and manipulation.

At the heart of the current version of the Digital Commodities Exchange Act is both its creation of a spot regime for the crypto cash markets and its delegation of the lion’s share of those authorities to the CFTC:

Notwithstanding any other provision of law, the Commission has exclusive jurisdiction over any agreement, contract or transaction involving a contract for the sale of any digital product in interstate commerce that is offered, solicited, negotiated, performed or otherwise dealt with on or subject to rules of a registered entity, including the conduct of such an office or business.

Under the bill, such a scheme would be voluntary, but would replace state-by-state licensing. However, it does not extend the existing powers of the CFTC to continue trading that serves US customers.

Some initial offers would certainly be considered securities, and these are the ones best left with the SEC, Thompson told The Block. But once these cryptocurrencies are issued, the way they work, they are commodities and commodities are regulated very efficiently and principle-based with the CFTC.

However, the CFTC has not changed the types of services under its regulatory jurisdiction since the Dodd-Frank Act of 2010 added swap execution facilities.

Thompson inherited much of the bill from his predecessor on the House Agriculture Committee, Mike Conaway, who introduced similar legislation in late 2020 shortly before his own retirement from Congress to open. a lobbying firm.

The new version removes some of the ways the original sought to provide more funding for the CFTC scheme. But the biggest change is the addition of an extended section related to Stable Coin Operators, which he calls Fixed Value Digital Product Operators.

A new report from the Treasury-led Presidents’ Task Force called for swift congressional action to regulate stablecoins.

The regime for fixed-value digital commodity operators in the bill appears to address a number of concerns common to stablecoin issuers, in particular the redemption of supporting assets and the disclosure of information.

But, like the exchange regime, the regime of stablecoin operators would remain voluntary, without penalty in the event of non-registration.

2021 The Block Crypto, Inc. All rights reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial or other advice.

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