Congressmen Darren Soto (D-FL) and Ted Budd (R-NC) recently introduced two bipartisan bills to address virtual currency price manipulation and maintain the United States’ leadership in the cryptocurrency industry. In a joint statement citing the New York Attorney General’s recent report on crypto exchanges and other recent media reports, the members announced that:
“Virtual currencies and the underlying blockchain technology has a profound potential to be a driver of economic growth. That’s why we must ensure that the United States is at the forefront of protecting consumers and the financial well-being of virtual currency investors, while also promoting an environment of innovation to maximize the potential of these technological advances. This bill [sic] will provide data on how Congress can best mitigate these risks while propelling development that benefits our economy.”
The two bills would create a Virtual Currency Consumer Protection Act and a U.S. Virtual Currency Market and Regulatory Competitiveness Act. Each would define “virtual currency” as “a digital representation of value that does not have legal tender status and that functions as a medium of exchange, a unit of account, or a store of value.” The bills then direct the Chairman of the Commodity Futures Trading Commission (“CFTC”), together with the heads of the Securities and Exchange Commission (“SEC”) and other federal regulators to prepare and deliver various reports to Congressional oversight committees.
The report under the Consumer Protection Act would focus on potential price manipulation in the market for virtual currencies, an analysis of existing market surveillance and enforcement mechanisms under federal regulations, and any recommendations for legislative changes to enhance the ability of the CFTC and other regulators to prevent price manipulation. Under the Market and Regulatory Competitiveness Act, the report would detail the current regulatory regime for virtual currency in the United States as compared to regulation around the world, the potential benefits of virtual currency and blockchain technology in the US commodities market, and recommendations for any legislative changes to promote competitiveness of the US economy, to clarify the virtual currencies that qualify as commodities under US law, to provide “new, optional regulatory structure for virtual currency spot markets (commonly referred to as exchanges)”, and to analyze the related costs and benefits of the foregoing.
As we have previously reported, the SEC has cited potential manipulations in the virtual currency marketplace as reasons to deny approval of Bitcoin exchange-traded products. Here, both bills default heavily to the CFTC as the primary regulator of these markets, which we expect will be troublesome for other affected federal agencies. Nevertheless, based on the uncertain political dynamic that currently prevails in Washington, we believe the likelihood that either bill will be enacted into law is rather low. Still, we commend lawmakers for continuing to study these issues and attempting to rationalize the regulatory environment for digital assets.