House Committee Adds Crypto Subpanel and Non-Partisan Group Urges Senate to Pause Digital Commodities Bill After FTX Collapse | Practical Law

House Committee Adds Crypto Subpanel and Non-Partisan Group Urges Senate to Pause Digital Commodities Bill After FTX Collapse | Practical Law

The House Financial Services Committee announced the addition of a new crypto subcommittee and a nonprofit financial reform group requested the Senate Agriculture Committee pause its consideration of the Digital Commodities Consumer Protection Act of 2022 (DCCPA) until more is known about what happened at failed bankrupt crypto exchange FTX.

House Committee Adds Crypto Subpanel and Non-Partisan Group Urges Senate to Pause Digital Commodities Bill After FTX Collapse

by Practical Law Finance
Published on 17 Jan 2023 • USA (National/Federal)
The House Financial Services Committee announced the addition of a new crypto subcommittee and a nonprofit financial reform group requested the Senate Agriculture Committee pause its consideration of the Digital Commodities Consumer Protection Act of 2022 (DCCPA) until more is known about what happened at failed bankrupt crypto exchange FTX.
On January 12, 2023, the Chairman of the House Financial Services Committee (HFS), Patrick McHenry (R-NC), announced a new HFS subcommittee called the Digital Assets, Financial Technology, and Inclusion Subcommittee (DAFTI) to be chaired by Arizona representative French Hill (R-AK). The jurisdiction of the new DAFTI subcommittee will include, among other things:
  • Providing clear rules of the road among federal regulators for the digital asset ecosystem.
  • Developing policies that promote financial technology to reach underserved communities.
  • Identifying best practices and policies that continue to strengthen diversity and inclusion in the digital asset ecosystem.
The creation of the new DAFTI subcommittee comes in the wake of the November 11, 2022 filings of bankruptcy of major crypto exchange FTX and 130 other affiliated companies (see Article, Expert Q&A on the FTX Bankruptcy: What Parties Can Expect). Prior to the FTX bankruptcy, a bipartisan group of US Senators who were also members of the Senate Agriculture Committee (Ag Committee) introduced the Digital Commodities Consumer Protection Act of 2022 (DCCPA) on August 3, 2022. DCCPA would authorize the Commodity Futures Trading Commission (CFTC) to regulate "digital commodity platforms" and "digital commodity" trading and give the CFTC primary oversight over most crypto trading platforms in the US. DCCPA would also require digital commodity trading platforms to register with the CFTC and would implement safeguards to prevent abusive trading practices and protect customer assets (see Legal Update, Bipartisan Legislation Would Give CFTC Oversight of "Digital Commodity Platforms" and "Digital Commodity" Trading).
On January 9, 2023, a nonprofit financial reform group called Better Markets issued a letter to the Ag Committee requesting that the committee pause consideration of DCCPA until more is known about failed crypto exchange FTX. In a January 10, 2023 statement, Better Markets expressed concern over provisions in DCCPA, noting that DCCPA was a top legislative priority of FTX and its former CEO, Sam Bankman-Fried, before FTX's downfall. According to Better Markets, DCCPA poses several serious concerns for investors and customers and to financial stability because the proposed legislation:
  • Would expand the definition of a commodity and narrow the definition of a security, effectively limiting the SEC’s authority and impairing its ability to crack down on crypto crooks.
  • Would allow crypto exchanges to self-certify their products and sell them to retail investors without adequate independent review.
Better Markets further observed that given the crypto industry’s history of breaking or ignoring the securities and commodities laws, DCCPA could invite more lawbreaking and hinder the SEC’s ability to police the securities markets.