If the SEC and CFTC cannot resolve the issue internally, the U.S. Congress will have to step in to decide who gets the bragging rights for cryptocurrency regulation.
A staff member of U.S. Senator Cynthia Lummis believes that if the issue is not resolved, the U.S. Congress will have to step in and resolve the dispute between the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). The controversy over who will regulate cryptocurrencies. appears and cannot be resolved internally.
The issue dates back to 2014, when the CFTC first claimed jurisdiction over virtual currencies. This was later reiterated in a 2018 U.S. federal court ruling that declared the CFTC has the power to prosecute criminals in fraud cases involving virtual currencies. To date, however, the SEC has primarily investigated U.S. crypto exchanges and crypto assets.
On August 3, Senators Debbie Stabenow (Michigan) and John Boozman (Arkansas) introduced the Digital Goods Consumer Protection Act (DCCPA) of 2022. If the bill passes the U.S. legislature, the CFTC would be given the power to regulate digital products.
Most notably, the CDCPA classifies both bitcoin (BTC) and ether (ETH) as digital commodities rather than securities. This is especially important because SEC Chairman Gary Gensler recently stated in an interview with US business news channel CNBC that BTC is the only cryptocurrency he would like to label as a commodity:
“Some, like Bitcoin — that’s the only thing I’m going to say because I’m not going to talk about these tokens, but my ex and others say they’re a commodity.»
But despite the nervousness, Lummis employees see less than a 50 percent chance of CDCPA passing this year:
“The only way for these two bills to pass this year is if a catastrophic black swan event, such as the collapse of major U.S. stock markets, can bring lawmakers together.»
The news comes after the U.S. Securities and Exchange Commission began investigating the $20 billion cryptocurrency exchange Coinbase, but Lummis staff also said that every U.S.-based cryptocurrency exchange is under some form of investigation .
In US law, the Howey test determines whether a transaction constitutes an investment contract (securities). The test shows that investment contracts exist “when funds are invested in a joint venture with a reasonable expectation of benefiting from the efforts of others”.
If ETH or any other crypto asset is found to fall under this definition, then U.S.-based crypto exchanges are illegally trading securities. The SEC recently listed nine crypto assets as securities.