There has been an argument on whether digital assets are commodities or securities. This simple question could have a serious impact on the future. The Lummis Bill has finally settled the debate stating that most cryptocurrencies are commodities. Basically, securities are regulated by the SEC which has a hostile history towards crypto. On the other hand, the Commodity Futures Trading Commission (CFTC) will have oversight on commodities. In order to come up with a legal framework, cryptocurrencies must first be categorized. Previously, the CFTC chair Rostin Behnam said that digital assets will be divided into two categories. And now, the Lummis Bill is proposing crypto regulations will be handed to CFTC instead of the SEC.
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Lummis Bill
Politically speaking, US regulators are struggling to categorize digital assets. Generally speaking, GOP members used to be against cryptocurrencies. However, there seems to be a shift in policies in the past few years. With that, the democratic members tend to be against cryptocurrencies while republicans have been defending it. As for the latest battle, GOP house members have been doing their best to prevent SEC from gaining jurisdiction over digital assets.
The Lummis bill, sponsored by US Senators Cynthia M. Lummis and Kristen Gillibrand, is the first attempt to push the agenda. The new bipartisan bill will hand over crypto regulations to the Commodity Futures Trading Commission. By categorizing digital assets as commodities, the bill prevents the securities and Exchange commission from regulating the crypto industry.
The SEC head Gary Gensler, a prominent crypto critic has argued that digital assets are essentially securities. On the other hand, the Lummis Bill asserts that “most digital assets are much more similar to commodities than securities.”
The CFTC already oversees Bitcoin (BTC) and Ethereum (ETH) futures trading in the US. Comparatively, the SEC has six times more budget than the CFTC.
Senator Lummis said in a statement,
“The United States is the global financial leader, and to ensure the next generation of Americans enjoys greater opportunity, it is critical to integrate digital assets into existing law and to harness the efficiency and transparency of this asset class while addressing risk.”
The Opposition
On the opposing side, critics still believe that most digital assets are securities. While this goes beyond semantics, it is pretty difficult to simply categorize them. The director if financial regulation and corporate governance Todd Philips said at the liberal think tank center for American progress.
“The status quo would be better than this bill. So many of these tokens are securities and need to comply with the regular, usual securities laws, and this bill tries to create a special crypto-specific disclosure regime that I don’t think discloses all the information investors need to fully evaluate whether to purchase a security.”
Much like anything else in the US, the upcoming regulations have become a battleground between the left and the right.
Jeremy Hogan, a crypto legal expert took on Twitter to express his opinion on the Lummis Bill.
Even IF a digital asset falls under SEC oversight, the reporting requirements aren’t onerous. AT LEAST it’s possible that a crypto company could fulfill the reporting requirements (unlike now). In summary, I like it. It tries and mainly strikes a nice balance. [In my opinion].”
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