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Bitcoin may soon see new legislation that would define the asset class as a commodity, leaving years of legal uncertainty behind it.
A bipartisan congressional attempt to grant authority over the crypto industry to the Commodities and Futures Trading Commission—as opposed to the Securities and Exchange Commission, which has historically held sway over the industry—may move to a vote as soon as the end of this year, according to Senator Kirsten Gillibrand (D-NY), a co-sponsor of the bill who spoke at this year’s Bloomberg Crypto Summit.
“The agriculture committee is finalizing their bipartisan part of the bill,” Gillibrand told Bloomberg on Tuesday. The New York Senator added that there was “serious common ground forming.”
Recent chaos in the crypto markets, she added, has generated “additional interest” among Senators concerned about investor protections and a lack of proper “oversight and accountability.”
The bill, titled the Responsible Financial Innovation Act, is co-sponsored by Gillibrand and Senator Cynthia Lummis (R-WY) and will go before the Congressional Agriculture Committee, which oversees commodities markets because of its historic role in grain futures markets.
The bill is hugely popular in the cryptocurrency industry and proposes to effectively disenfranchise the SEC—which has long equivocated on the legal status of most cryptocurrencies, resulting in years of legal gray area.
Under the new bill, “fungible digital assets which are not securities” would be classed as commodities—unlike securities, commodities are subject to fewer restrictions on who can invest. The definition of a security, according to the century-old Howey test, is an asset in which an “expectation of profit” derives from the work of a distinct third party.
Crypto lobbyists argue that digital tokens do not fall under this rubric and ought to be regulated more like grain, or gold.
The bill would also include “ancillary assets”—tokens that are only partly decentralized but still don’t meet the criteria of the Howey test—under the CFTC’s jurisdiction but would require them to make certain additional disclosures.
However, while Bitcoin is generally agreed to be a commodity, said Gillibrand, there remains significant debate over which other cryptocurrencies fall into 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 really refine that definition so there could be clarity,” said Gillibrand. “I think where the debate will be is which fits into which definition—but that’s exactly what we want the regulators to do.”
Other parts of the bill proposing increased oversight of stablecoins, included in the wake of Terra’s spectacular collapse earlier this year, are likely to go to a vote next year, Gillibrand said.
She said this was in part due to the complexity of the topic and relative newness to a large number of Senators.
“It’s a big topic and comprehensive and it’s still new to many U.S. Senators and it’s a lot for them to digest with the few remaining weeks we have in this calendar year,” Lummis said. She added that many senators were yet to be able to tell the difference between “payment stablecoins” and “algorithmic stablecoins.”
From changing who regulates crypto, taking aim at stablecoins, and even throwing in cybersecurity provisions, the latest bill could dramatically rearrange how the industry moves forward. And given the years of uncertainty, guardrails for the industry may just be what the doctor ordered.
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