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Senate proposal would give CFTC responsibility for bitcoin and ethereum

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Senate proposal would give CFTC responsibility for bitcoin and ethereum

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The Commodity Futures Trading Commission would take a lead role in overseeing the two largest cryptocurrencies and the platforms they are traded on under a new bill from Sens. Debbie Stabenow (D-Mich.) and John Boozman (R-Ark.).

Oversight of the remaining cryptocurrencies would be split between the CFTC and the Securities and Exchange Commission, although the decision-making process is still unclear.

The two agencies have fought over more authority over digital assets, contributing to confusion in Washington over how to classify and regulate cryptocurrencies and the economy that has grown around them. The bill aims to provide some clarity by commodifying both bitcoin and ethereum, which together make up about two-thirds of the cryptocurrency market.

This would subject Bitcoin and Ethereum to regulation by the CFTC, which already oversees the futures markets for both. And online platforms that allow investors to trade the digital tokens, like Coinbase, would be required to register with the agency.

Stabenow — chairman of the Senate Agriculture Committee, which oversees the CFTC — said in a statement that crypto markets “lack the transparency and accountability” that investors have come to expect from traditional financial markets. “That’s why we’re closing regulatory loopholes and requiring these markets to operate under simple rules that protect customers and keep our financial system safe.”

In addition to Boozman, the agriculture committee’s top Republican, two other panelists, Sens. Cory Booker (DN.J.) and John Thune (RS.D.), co-sponsor the measure.

The bill joins an increasingly crowded field of legislative proposals to regulate the trillion-dollar digital asset market, a priority that has taken on greater urgency after the recent implode of several high-level cryptos projects devastated tens of thousands of retail investors. Leaders of the House Financial Services Committee are work with the Treasury Department on a bill to subject stablecoin issuers to bank-like oversight, though they discarded expects a quick markup late last month on lingering differences with the project.

And Sense. Cynthia M. Lummis (R-Wyo.) and Kirsten Gillibrand (DN.Y.) in June unveiled what they presented as a comprehensive industry regulation plan. Their proposal gave primary responsibility for the industry to the CFTC, but unlike Stabenow and Boozman’s bill, it would make it optional for crypto exchanges to register with the agency.

Crypto Industry Scores Big Victory in Long-Awaited Senate Bill

Both bills would allow the CFTC to assess the fees of crypto industry players to fund an expanded budget. The agency, which is about one-sixth the size of the SEC, is already tasked with overseeing a range of financial markets, from grain and oil futures to more complex commodities.

For months, crypto interests have been lobbying lawmakers to make the CFTC their primary regulator. They say the regulator would give them friendlier treatment than the SEC, where Chairman Gary Gensler has taken an aggressive public line toward the industry.

CFTC Chairman Rostin Behnam is also advocating a bigger role for his agency. In a speech at the Brookings Institution last month, he said federal and state regulators sharing responsibility in a “patchwork hedging” approach “are proving increasingly inadequate” as the crypto market rapidly evolves.

An SEC spokesperson declined to comment on the bill; the CFTC did not respond to a request for comment.

Todd Phillips, director of financial regulation and corporate governance at the liberal think tank Center for American Progress, called the Stabenow-Boozman proposal “a great piece of legislation.”

“It provides regulatory structure around crypto products without removing authority from other agencies, like the SEC,” he said in an interview. “It specifically requires the registration and regulation of brokers, puts in place rules to protect investors and puts in place a framework around this market to ensure that investors are not taken advantage of.”

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