New legislation that would designate the digital asset class as a commodity and put years of legal uncertainty around Bitcoin in trash—may soon be passed.
Senator Kirsten Gillibrand, one of the senators who proposed the bill, said it may come up for a vote as early as the end of this year. The bill would transfer control of the crypto industry from the Securities and Exchange Commission, which has historically held that authority, to the Commodities and Futures Trading Commission.
Gillibrand told a publishing house that “the agriculture committee is finalizing their bipartisan part of the bill.” He further added that there was “serious common ground forming.”
The Responsible Financial Innovation Act, co-sponsored by Gillibrand and Senator Cynthia Lummis, will be heard by the Congressional Agriculture Committee, which has historically monitored grain futures markets and is in charge of overseeing commodities markets.
The proposed legislation would classify “fungible digital assets which are not securities” as commodities, which have fewer limits on who can invest, than securities. According to the Howey Test, a security is defined as an asset in which there is an “expectation of profit” due to the efforts of a certain third party. Crypto advocates argue that digital tokens do not fit into this category and should instead be governed more like grains or precious metals.
It would also bring tokens that are only partially decentralised but do not yet pass the Howey test—under the CFTC’s ambit while imposing some additional transparency requirements.
Gillibrand opined that the consensus is that Bitcoin is a commodity, there is still considerable disagreement on which other cryptocurrencies are in that category.
“The question of what else qualifies as a commodity and what else qualifies as a security, we have a pretty robust definition that we worked with SEC staff on, and we worked with industry experts on, to make sure we refine that definition so there could be clarity. I think where the debate will be is which fits into which definition—but that’s exactly what we want the regulators to do.”
In the wake of Terra’s stunning collapse earlier this year, other provisions of the bill calling for more monitoring of stablecoins were added, and Gillibrand predicted that they will likely be put to a vote next year.
The proposed law could significantly alter how the sector develops, changing who governs cryptocurrency, targeting stablecoins, and perhaps include cybersecurity provisions. Standards and guidelines for the industry may also be reasonable given the years of uncertainty.