Cryptocurrency Legislation Would Empower Commodity Futures Trading Commission

Bipartisan legislation introduced Thursday would provide the Commodity Futures Trading Commission oversight authority over the growing cryptocurrency market.

The Digital Commodity Exchange Act is a retooled version of legislation originally introduced in 2020 that would define digital commodities and empower the CFTC to provide regular oversight for spot digital commodity exchanges, market intermediaries and stablecoin providers.

Under the legislation, digital commodity exchanges would be required to register with the CFTC if they plan to offer leveraged trading or list for sale digital commodities distributed to individuals before being available to the public. According to the legislation, the bill “authorizes the CFTC to register and regulate trading venues offering spot or cash digital commodity markets as digital commodity exchanges.”

Spot markets offer immediate delivery of commodities such as cryptocurrency.

The bill further requires registered digital commodity exchanges to monitor trading activity, prohibit abuse trading practices, establish minimum capital requirements, report specified trading information publicly, avoid conflicts of interest, establish governance boards and adopt cybersecurity practices.

"To foster American innovation and tech job growth, Congress must establish a clear process for creating and trading digital commodities that prioritizes consumer protections, transparency and accountability,” said Rep. Ro Khanna, D-Calif., who sponsored the bill. Cosponsors include Rep. Glenn Thompson, R-Pa., Tom Emmer, R-Minn., and Darren Soto, D-Fla.

 “This bipartisan bill will create a regulatory framework for these emerging technologies and keep us competitive with the rest of the world,” Khanna said.

The legislation specifically defines digital commodity as “any form of fungible intangible personal property that can be exclusively possessed and transferred person to person without necessary reliance on an intermediary.”

In a statement summarizing their sponsored legislation, lawmakers said the bill “complements the work” of other regulators, including the Securities and Exchange Commission’s investor protection activities.

"Regulatory clarity is critical for digital commodity markets to promote innovation and consumer protection. Innovators are spending up to fifty percent of start-up costs on legal fees because of the current regulatory ambiguity between what is a security and what is a commodity," Soto said in a statement. "That’s why the Digital Commodity Exchange Act will provide the necessary consumer protections, responsible federal oversight and regulatory clarity for all participating in digital commodity markets."

The bill is the latest in a years-long dialog among lawmakers and policymakers on how best to regulate the $2 trillion cryptocurrency market.