Tuesday, February 7, 2023

CFTC Might Get Authority Over Regulating Crypto Exchanges, Stablecoins

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The CFTC might get authority over regulating crypto exchanges and stablecoins as the Digital Commodity Exchange Act of 2022 builds off the exchange act to fill gaps in the regulation not fully addressed by both the SEC and the CFTC so let’s read more today in our latest cryptocurrency news.

The bipartisan group of lawmakers like the leading Republican on the House Agriculture Committee introduced a new bill to regulate developers, dealers, and exchanges that work with digital commodities including bitcoin and other stablecoins. The Digital Commodity Exchange Act will expand the CFTC regulatory power sponsored by Rep. Glen Thompson as well as rep Tom Emmer and pulled support from across the aisle with Rep. Ro Khanna and Rep. Darren Soto as co-sponsors.

The CFTC might get authority over regulating stablecoins and the documents show that the CFTC which already has a role in regulating derivatives markets for grains and other agricultural staples registers trading venues offering spot or cash digital commodity markets as digital commodity exchanges and that is that the CFTC will regulate crypto exchanges like fTX US or Coinbase. The CFTC Chair Rostin Behnam asked the committee to consider expanding authority for the CFTC beyond the historical role as derivatives regulator. The bill as written will allow for that by letting the agency regulate spot trading or other commodities while the derivatives and futures markets allow traders to speculate on which direction the price of the asset is headed and spot markets allow traders to buy or sell at the current price.

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The bill will give the CFTC jurisdiction over digital assets that don’t convey rights and obligations associated with security and how crypto-based securities will still be handled by the SEC, more things will be regulated by the CFTC. This has been a turning point for the industry because some projects are not certain whether regulators see their coins or tokens as a security. However, according to the bill, the digital currency exchanges will be required to seek CFTC approval before they start trading new digital commodities. While this will provide some clarity about the underlying nature of assets and could also slow the pace at which exhcnages can list these new tokens. Coinbase CEO Brian Armstrong stated that the exchange wants to allow trading for every asset that it can.

The bill outlines rules for the pre-sales of digital commodities so that they are not dumped on the open market and harm customers. As a part of the listing process, the exchanges have to show the price of crypto cannot be easily manipulated. The bill also carves out a space for stablecoin issuers that can register with the CFTC and they will be required to submit to regular audits and ensure that they have assets on hand to redeem the stablecoin for dollar.

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