A United States Senator Cynthia Lummis staffer believes that U.S. Congress will have to step in and resolve the dispute between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) regarding who regulates cryptocurrencies if the matter cannot be resolved internally.
The issue stems from 2014 when the CFTC first asserted jurisdiction over virtual currencies. This was later reaffirmed by a U.S. Federal Court ruling in 2018, which stated that CFTC had jurisdiction to prosecute criminals over fraud cases involving virtual currencies. However, it has been the SEC that has predominantly been investigating U.S.-based crypto exchanges and crypto assets to date.
On Aug. 3, Senators Debbie Stabenow (Michigan) and John Boozman (Arkansas) introduced the Digital Commodities Consumer Protection Act of 2022 (DCCPA). If the bill is passed into law by the U.S. legislature, the CFTC would be granted rights to regulate digital commodities.
Most notably, the DCCPA would class both Bitcoin (BTC) and Ether (ETH) as digital commodities and not securities. This is particularly significant because SEC chairman Gary Gensler recently said in an interview with U.S. business news channel CNBC that BTC is the only cryptocurrency he is comfortable with labeling as a commodity:
“Some, like Bitcoin — and that’s the only one I’m going to say because I’m not going to talk about any one of these tokens, but my predecessors and others have said they’re a commodity.”
But despite the tension, Lummis' staffer thinks the DCCPA bill has less than a 50% chance of being passed this year:
“The only way either bill would pass this year is if a catastrophic black swan event, like a major U.S. exchange collapsing, could rally lawmakers.”
The news comes after the SEC has begun investigating the $20 billion crypto exchange Coinbase, but Lummis' staffer also stated that every U.S.-based crypto exchange is under investigation in some form.
Under U.S. law, the Howey test determines whether a transaction constitutes an investment contract (security). The test states that an investment contract exists “when there is the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.”
If ETH, or any crypto asset for that matter, is found to fall within this definition, then U.S.-based crypto exchanges would be illegally trading securities. The SEC recently listed nine crypto-assets as securities.