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CFTC Commissioner Mersinger says the time has come for action on crypto regulation

November 18, 2022 Coin Telegraph

CFTC

The commissioner said Congress may have to intervene in relations between the regulating agencies, but both have a role to work out; until then the burden is on the states.

United States Commodity Futures Trading Commission (CFTC) commissioner Summer Mersinger suggested that the time to act on cryptocurrency regulation may have arrived. Speaking at the Texas Blockchain Summit on Nov. 18, Mersinger considered what it may take for effective crypto regulation in the United States.

“Lately it’s probably been 70-80% of what we talk about,” Mersinger said of crypto. “We are clearly in a situation where we need to stop, we need to gather the facts, we need to understand what’s happening […] to move policy ahead.”

Mersinger saw forward movement in the process. “We are getting to the point that maybe we are past the education stage and now it’s the action [stage],” she said. “But it’s an interesting political question because it isn’t partisan issue.”

CFTC Commissioner Summer Mersinger at @txblockchain1 Summit.

Cc @lee_bratcher @blockcoalition @cascadiacounci1 @wtia pic.twitter.com/sLtlHp4MfS
— Arry (@ArryinSeattle) November 18, 2022

The CTFC and Securities and Exchange Commission will work out jurisdictional issues eventually, Mersinger continued. “There’s a role for both, we just have to figure out to make it work,” she said. They may need some help:

“Congress may have to say, ‘No, no, no, you really have to work together. […] And here’s when you’re going to meet and here’s what you’re going to talk about.’”

Real-time proof of reserves may be part of digital asset regulation in the future. “We expect that from our regulated entities. We don’t ask for it every day, but we can. And I think that’s fair,” Mersinger said. “Maybe the control is decentralized, but you take customer funds and you put them in this central location that the regulators know about and see and can check.”

In the meantime, “Until there’s some decision at the federal level, the states are the first line of defense,” Mersinger said. “Sometimes in Washington we forget that the states were the first actors and the first regulators here and that they play an important role. I think a lot of times states get left out of the conversation, and that’s unfortunate.”

Mersinger, a Republican, was nominated to the CTFC by President Joe Biden in December. She dissented from the commission’s treatment of Ooki DAO, calling it regulation by enforcement.

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October 21, 2022 Coin Telegraph

bitfinex

The Commodity Futures Trading Commission (CFTC) says 20% of its enforcement actions were aimed at the digital assets market in the 2022 fiscal year.

The U.S. commodities regulator certainly doesn’t want to look like it's going easy on crypto, revealing it was behind 18 separate enforcement actions targeting digital assets in the 2022 fiscal year.

In an Oct. 20 report from the Commodity Futures Trading Commission (CFTC), a total of 82 enforcement actions were filed in 2022’s fiscal year, imposing $2.5 billion in “restitution, disgorgement and civil monetary penalties either through settlement or litigation.”

The CFTC said that 20% of the enforcements were aimed at digital asset businesses, with chairman Rostin Behnam stating:

“This FY 2022 enforcement report shows the CFTC continues to aggressively police new digital commodity asset markets with all of its available tools.”

One of the more recent CFTC enforcement actions that gained notoriety in the crypto world was a $250,000 penalty against bZeroX, its successor Ooki DAO, and its founders in September.

The action sparked fierce criticism from the community for going after the members of a decentralized autonomous organization (DAO), with CFTC commissioner Summer Mersinger labeling the move a "blatant ‘regulation by enforcement.’"

The CFTC also highlighted actions taken during the year against the operators of the Digitex Futures exchange for illegal futures offerings, manipulation of its native token DGTX, and failure to provide a customer identification and anti-money laundering program.

It also took action against Bitfinex for engaging in “illegal, off-exchange retail commodity transactions in digital assets with U.S. persons,” and operating without registering as a futures commission merchant (FCM).

Meanwhile, the report pointed to action against Tether Holdings for making “untrue or misleading statements” and “omissions of material” in connection with its USDT stablecoin Tether was ordered to pay a civil monetary penalty of $41 million.

It also targeted South African Pool Operator and CEO Cornelius Johannes Steynberg with fraud charges for accepting around 29,400 BTC worth over $1.7 billion from approximately 23,000 non-eligible contract participants from the United States in late June.

The crypto industry had previously favored the CFTC for being easier on digital asset regulation, however, chairman Rostin Behnam has vowed to come down hard on the asset class saying: “‘Don’t expect a free pass,” earlier this month.

Both the CFTC and Securities and Exchange Commission (SEC) are currently wrangling for control of crypto asset regulation.

A bill submitted by senators Cynthia Lummis and Kirsten Gillibrand in June propose that the CFTC oversees crypto regulation which would be much better for the industry as the assets would be considered commodities rather than securities which have much more stringent rules.

However, Congress is unlikely to turn its attention to digital asset regulation until sometime next year as confirmed by Congressman Jim Himes this week.

‘Secretly circulating’ draft crypto bill could be a ‘boon’ to DeFi

October 20, 2022 Coin Telegraph

CFTC

A crypto bill that industry advocates previously said would “kill DeFi” has seen an updated draft released online with one commentator saying the U.S. is “finally getting their act together.”

A new draft of the Digital Commodities Consumer Protection Act (DCCPA) bill has started to circulate online, with some commentary suggesting it could be positive for decentralized finance (DeFi) and crypto.

A prior draft version of the bill drew heavy criticism from industry representative bodies for containing too broad a definition for a “digital commodity platform,” which “could be interpreted as a ban on decentralized finance (DeFi).”

In a newly posted 31-page draft bill, shared by Delphi Labs general counsel Gabriel Shapiro, the lawyer said he made the draft bill publicly available as he believes in “transparency and open discussion.”

Shapiro remarked on a section amending the meaning of a “digital commodity trading facility” which excluded persons who develop or publish software, commenting that it “could be a boon” to DeFi and crypto.

Notably, this version contains a limited exception to the term "digital commodity trading facility" which would exclude persons who solely develop or publish software--this could be a boon to DeFi/crypto. pic.twitter.com/0pa843RJ9h
— _gabrielShapir0 (@lex_node) October 19, 2022

Dr. Martin Hiesboeck head of research at crypto exchange UpHold tweeted that the newly released draft seems to follow similar regulations in the European Union and the United Kingdom, suggesting that the United States is “finally getting their act together.”

First impression: leaked #CFTC Bill seems to follow UK/EU reg in broad strokes even though it uses similar somewhat different terminology. Will prepare a detailed report by tomorrow. US finally getting their act together. All good.
— Dr Martin Hiesboeck (@MHiesboeck) October 19, 2022

The comments are a change of tone from the previous version of the bill, which was described by Web3 incubator and advocacy group Alliance DAO as one that “kills DeFi.”

The decentralized autonomous organization (DAO) wrote the bill “creates a compliance architecture that precludes the concept of a system of smart contracts operating decentralized infrastructure with little or no reliance on human activity,” as it required people to enforce compliance with the regulations.

There have long been calls for regulatory clarity regarding digital assets in the U.S. with some calling on the U.S. Congress to pass legislation defining commodities and give jurisdiction to the CFTC.

First introduced in August the DCCPA extends the regulatory power of the Commodities Future Trading Commission (CFTC) on the cryptocurrency industry and attempts to define certain cryptos, such as Bitcoin (BTC) and Ether (ETH) as commodities rather than securities.