The proposed bill was introduced by Senate Agriculture Committee Chairwoman Debbie Stabenow, a Democrat from Michigan, and Committee Ranking Member Sen. John Boozman, a Republican from Arkansas.
Stabenow and Boozman argued that this bill provides much needed regulatory clarity to the cryptocurrency industry by placing a major portion of the policing work under a single regulatory body.
"This fast-growing industry is currently governed largely by a patchwork of regulations at the state level," said Boozman in a statement. "That simply is not an effective way to protect consumers from fraud."
"Right now … [there is] no federal agency to conduct oversight over the cryptocurrencies, and we know that needs to change," said Stabenow. "The money of American consumers is at risk."
According to the current draft of the proposed legislation, bitcoin and ether are formally classified as commodities, as opposed to securities, which would place them under the control of the Securities and Exchange Commission (SEC).
As commodities, the CFTC would be given exclusive jurisdiction over regulating bitcoin and ether. The current bill does not mention any other cryptocurrency assets that will be classified as commodities. It also does not provide criteria for classification. (Related: Democratic Senate passes provision in infrastructure bill that expands government surveillance on cryptocurrency.)
The bill would require companies providing cryptocurrency platforms to register with the CFTC, including brokers, custodians and exchanges. Registration would come with certain requirements, allegedly to maintain fair pricing, prevent market manipulation, avoid conflicts of interest and maintain "adequate financial resources," according to the description of the bill provided by Stabenow and Boozman.
The two senators are backed by colleagues Democrat Sen. Cory Booker of New Jersey and Republican Sen. John Thune of South Dakota. They are pursuing a September markup, which is an open session, inviting debate over the details of the legislation.
The proposed bill marks the latest development in an intensifying dispute among state governments, federal agencies and congressional committees over who will regulate cryptocurrencies. Over a decade after bitcoin was created, crypto assets remain largely unregulated by the federal government and state-level regulations vary, leaving many investors concerned over the lack of key protections from fraud and market manipulation.
As chairwoman and ranking member of the Senate Agriculture Committee, Stabenow and Boozman have oversight authority over the CFTC. Both did not want to stretch their regulatory authority beyond that, unlike earlier and more sweeping bills to regulate the crypto industry from other senators.
"We're staying in our lane, but it's a really important lane for consumers," said Stabenow.
Analysts have noted that the bill refuses to define what a security is, leaving open the possibility for the SEC to continue to hold jurisdiction over cryptocurrency assets that function more like securities.
"We're not defining what a security is. I have great confidence in [SEC Chairman] Gensler to be able to use his authorities," said Stabenow.
CFTC Chairman Rostin Behnam, who used to work for Stabenow as a member of her staff, stated that his agency is "ready and well situated" to oversee spot markets related to digital commodities. Behnam has been vying for new authority to regulate digital commodity spot markets where cryptocurrency assets like bitcoin and ether directly change hands. He commended Stabenow and Boozman for their "targeted" effort to regulate crypto.
"We are at a critical inflection point where new legislative authority is needed to clarify ambiguities and provide a regulatory framework." said Behnam.
Learn more about cryptocurrencies at CryptoCult.news.
Watch this clip from InfoWars discussing how the administration of President Joe Biden plans to tax cryptocurrencies, allegedly as a way of dealing with fraud in the crypto market.