Yesterday, the US Senate Agriculture Committee released a discussion draft for a bipartisan crypto market structure bill. Republican Committee Chairman John Boozman and Democratic Senator Cory Booker jointly released the draft. It gives the Commodity Futures Trading Commission (CFTC) authority to regulate digital products and builds on the Clarity Act, which was approved by the House in July.
Meanwhile, Acting CFTC Chair Caroline Pham is moving things forward, with a view to allowing exchanges to support cryptocurrencies, including using leverage in trading.
The Senate Banking Committee also released a bill in July, the Responsible Financial Innovation Act (RFI Act). The farm bill focuses on assets regulated by the CFTC, while the RFI Act targets those under SEC supervision. Certain cryptocurrencies such as Bitcoin and Ethereum will be considered digital commodities with related activities under the supervision of the CFTC. The RFI Act defined a new term for quasi-crypto securities, “ancillary assets,” which will be supervised by the SEC. However, they will not be regulated in the same way as securities.
The Agriculture Committee’s draft includes regulations for digital commodity spot markets and requirements for managing fund segregation, conflicts of interest, customer disclosures, as well as prohibitions on affiliated trading. One of the key aspects is the definition of a digital asset, with exclusions making up the bulk of the definition. A digital product is primarily defined as a fungible asset that can be transferred p2p using a distributed ledger. But this could apply to many assets, so exclusions include securities, securities derivatives, stablecoins, deposits, funds, conventional commodities and their derivatives, and others.
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