Members of the House are getting serious about the regulation of cryptocurrency. The lawmakers intend to present two bills on Thursday which would protect consumers, prevent fraud, and make sure the country will remain at the forefront of the global digital asset development.
While the bipartisan bills don’t provide specific guidelines as to how those goals become attainable, they instead ask the Commodity Futures Commission to provide a set of recommendations.
Reps Tedd Budd, R-N.C., and Darren Soto, D-Fla., articulated that Virtual currencies, as well as the underlying blockchain technology, have great potential to become a driver of economic growth.
They also said that this is the reason there’s a need to make sure that the United States does not lag in protecting consumers and the virtual currency investors’ well-being. They also intend to encourage an environment of innovation to make the most out of the potential of such technological advances. Pursuing any cryptocurrency legislation marks a level of maturity in these markets.
Although Bitcoin itself has been in existence for about a decade already, the cryptocurrency fundraising method known as initial coin offerings started attracting billions of dollars from various retail investors towards the end of 2017. Lawmakers and regulators were caught off guard since a lot of ICOs were fraudulent and were only backed by random abstract ideas or in some instances, none at all.
Last year, the price of Bitcoin went up to about $20,000 despite the mad dash to own digital currency, but since then, it lost more than 75% of its value. In November alone, it slid down 37%.
The Road Towards New Crypto Regulations
At present, the regulatory environment in crypto is split between CFTC which oversees both ether and bitcoin, while the Securities and Exchange Commission (SEC) is in charge of managing all other cryptocurrencies.
The SEC already cracked down with settlements from failing to register initial coin offerings as securities as well as fraud. Jay Clayton, the chairman of the agency, repeatedly mentioned that majority of cryptocurrencies are securities, and as such, need to register given those laws.
During an October roundtable, more clarity, as well as global competition, were major themes. Approximately 50 industry participants along with Budd and Soto attended the said roundtable. The attendees articulated that if companies don’t get a better understanding of the industry’s legal footing, the country may lag in terms of innovation and trail in the possibly lucrative blockchain realm.
The U.S. Virtual Currency Market and Regulatory Competitiveness Act of 2018, which is the second bill, focus on ensuring that the United States remains competitive in the industry.
It directs the CFTC to conduct a comparative study on crypto regulation abroad, after which, provide recommendations for U.S. regulatory changes. The bill also calls for alternatives to existing burdensome regulations that could inhibit innovation.
Members of the House are asking CFTC to elaborate further on which virtual currencies they consider as commodities. At the same time, it requests the agency to assess the benefits and costs of a new regulatory structure that may replace the existing money transmission system as some in the industry argue that it’s inefficient.
According to the lawmakers, most of the consumer protection concerns came from a New York Attorney General’s report on virtual exchanges’ risk of manipulation. In the months-long investigation conducted by the AG, published in September, it explains that cryptocurrency exchanges are susceptible to market manipulation. It also lacks standard consumer protections that usually come with established financial markets.
The first bill, called the “Virtual Currency Consumer Protection Act,” asks the CFTC to come up with a report that will examine the potential for the manipulation of price in cryptocurrency and what the effect is on the economy. Rep. Bonnie Watson Coleman, D-N.J. also sponsored this bill.
There are others in Congress who also recognized the need for more regulations about the digital asset class.
Rep. Warren Davidson, R-Ohio, is currently drafting a bill related to crypto and will be introduced before the year ends. Back in October, he said that the law was still in the works. As for Rep. Tom Emmer, R-Minn, he also intended to introduce three crypto and blockchain-friendly bills in September.