U.S. Senators Debbie Stabenow (D-MI), John Boozman (R-AR), Cory Booker (D-NJ) and John Thune (R-SD) introduced the Digital Commodities Consumer Protection Act of 2022 which, among other things, establishes a framework for the CFTC to regulate the spot market for digital commodities.
The proposed legislation would:
- amend the definition of "commodity" in the Commodity Exchange Act to include a new category of commodities called "digital commodities" that includes Bitcoin and Ether;
- establish new regulatory registration categories including "digital commodity broker," "digital commodity dealer" and "digital commodity trading facility";
- grant the CFTC exclusive jurisdiction over digital commodity trades with an exception for "transactions in which a merchant or consumer is using a digital commodity solely for the purchase or sale of a good or service";
- require that digital commodity platforms (e.g., digital commodity brokers, dealers, trading facilities, etc.) comply with certain core principles designed to "protect customers and the integrity of the digital commodity marketplace";
- authorize the CFTC to create rules governing margined, leveraged or financed digital commodity trades;
- establish the mechanisms for digital commodity trading facilities to list for trading digital commodity contracts;
- authorize the CFTC to inspect and monitor digital commodity platforms;
- require the CFTC to create customer protection rules obligating digital commodity platforms to (i) "disclose to customers material conflicts of interest and material risks of trading digital commodities," (ii) "communicate in a fair and balanced manner" and (iii) establish standards for such platforms' marketing and advertising; and
- prohibit digital commodity platforms from engaging in "any course of business in connection with its business as a digital commodity platform that is fraudulent, deceptive or manipulative."
Senator Stabenow, Chair of the Senate Agriculture Committee, emphasized that the aim of the legislation is to close regulatory gaps and require digital commodity markets to "operate under straightforward rules that protect customers and keep [the U.S.] financial system safe."
In a statement, CFTC Chair Rostin Behnam commended the bipartisan legislation, saying that new legislative authority is necessary to "clarify ambiguities and provide a regulatory framework to the digital commodity market that protects customers, provides market integrity and certainty, and ensures financial stability."