A member of the team of Republican Senator Cynthia Lummis, stated that Congress should take action if a jurisdiction dispute is not resolved internally. The dispute over who regulates cryptocurrencies, occurs between the Securities and Exchange Commission (SEC) and the US Commodity Futures Trading Commission.
The investigations carried out by the SEC against the exchange Coinbase is only the beginning of everything. According to the Lummis team member, all exchanges in the United States are being investigated. Currently, there are more than 40 exchanges operating and even the largest in the world, Binance, is being investigated in different instances.
If the dispute is not resolved internally, lawmakers would have to intervene. If this were to happen, they would likely support the CFTC, the team member explained. In a release, the CFTC rejects what it defines as “regulation through the application». This comes on the heels of a series of actions asserting the SEC’s ability to regulate the crypto industry. However, it is the CFTC that regulates cryptocurrencies according to the law.
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Background: Who regulates cryptocurrencies in the United States?
This dates back to 2014, when Bitcoin was not yet known worldwide, but the digitization of the economy was already beginning to develop. In 2014 the CFTC affirmed its jurisdiction over the “digital currencies“, by that time there was no Ethereum nor the cryptocurrencies that emerged later.
Subsequently, a US Federal Court ruling, in 2018, states that the CFTC has jurisdiction to prosecute criminals on fraud cases related to digital currencies, which will subsequently be cryptocurrencies.
Although this has not been fulfilled in the right way, it has been the SEC who regulates cryptocurrencies and exchanges operating in the United States. Until then, talks between the SEC and the CFTC have not been fruitful, which could trigger congressional intervention. And that intervention seems to have begun.
The law that could change everything
Last Wednesday, Senators Debbie Stabenow, of Michigan, and John Boozman, of Arkansas presented a bill called: Digital Commodities Consumer Protection Act (DCCPA). If the bill is approved, it could reaffirm the CFTC’s rights to regulate cryptocurrencies. The DCCPA would classify Bitcoin (BTC) and Ether (ETH) as digital commodities and not as securities.
This classification as Digital Commodities has become relevant, since recently in an interview with CNBC, SEC Chairman Gary Gensler stated the following:
“Some, like Bitcoin – and that’s the only one I’m going to say because I’m not going to talk about any of these tokens, but my predecessors and others have said it’s a commodity.”
Test Howey determines whether a transaction constitutes an investment contract (security). Which establishes that there is an investment contract: “when there is an investment of money in a joint venture with a reasonable expectation of profit to be derived from the effort of others».
However, the member of Senator Lummis’s team gives her a less than 50% chance of being approved. For this to happen, according to the Lummis employee, the bankruptcy of a large exchange in the United States or some similar catastrophic event must be triggered.