Regulations for Bitcoin, Other Cryptocurrency Sought in Congress

A top House Republican is seeking to regulate cryptocurrencies, including Bitcoin and Ethereum, by setting clear jurisdictions for how the government oversees the industry — a new financial frontier.

“We have an opportunity and a responsibility to be leaders in the digital assets space to protect consumers, foster innovation, and reduce regulatory burdens,” said House Agriculture Committee ranking member Glenn “GT” Thompson (R-Pa.), who will release a discussion draft text Tuesday. His panel oversees commodity markets.

The move is an opening bid to come to a bipartisan consensus on how to regulate a new and evolving form of currency. GOP staffers who helped craft the proposal said Thompson hopes it will spark discussions with Democratic colleagues.

Cryptocurrency, digital currency that emerged in the 21st century, functions through investments. That’s somewhat similar to the traditional stock market, as described by the Nasdaq Stock Market Inc. Lawmakers, whose views on cryptocurrency range from skepticism to idealism, are trying to bring clarity to a burgeoning marketplace, which currently functions with vague rules.

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More than one out of 10 Americans bought or traded cryptocurrencies from June 2020 to June 2021, a survey by NORC, a research organization at the University of Chicago, found.

Cryptocurrency uses blockchain, a type of technology that acts as a ledger to track transactions, IBM Corp. reports. Blockchain is decentralized, so it doesn’t rely on one particular system, but a network. Decentralization makes data recovery easier and doesn’t require trust among network members, as each one has access to the exact same record of information, Blockchain Council argues.

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A Bitcoin ATM stands in a 7-Eleven store in Los Angeles as the cryptocurrency’s price soared on Nov. 10, 2021.

Bitcoin was the first decentralized cryptocurrency, created following the Great Recession of 2008 by Satoshi Nakamoto. The inventor’s name is thought to be a pseudonym. Other popular cryptocurrencies include Ethereum, Binance Coin, and Solana.

Both the House and Senate agriculture panels oversee the Commodity Futures Trading Commission. The independent federal agency regulates commodity futures and markets for swaps, agreements between two parties to exchange cash flows in the future based on an underlying price or instrument.

Thompson said he hopes to involve this group of lawmakers in monitoring cryptocurrency. His draft text is meant to solicit feedback from stakeholders, regulators, and lawmakers “to ensure we advance the best possible framework as American innovators build the next generation of digital infrastructure,” he said in a statement.

Because the bill has yet to be formally introduced, it lacks cosponsors.

Drawing Clear Jurisdictions

Thompson’s measure would plug rifts between the CFTC and the U.S. Securities and Exchange Commission by drawing clear jurisdictions over how the government oversees cryptocurrency. It would extend the CFTC’s existing framework to digital commodities, letting the agency register and regulate them as a new type of entity.

Federal requirements would then fall on a registered Digital Commodity Exchange. Conditions would involve monitoring trading activity, barring abusive trading practices, public reporting of trading information, and more.

While registration would be voluntary, the proposal would offer incentives, including working with a single regulator and eligibility to provide leveraged trading.

The SEC’s role in the process is still to be determined, a Republican policy staffer said. But the commission would continue its responsibility of monitoring entities that raise money — in this case to develop a digital commodity project, ensuring that they abide by the relevant securities laws.

Crypto’s ‘Staying Power’

The typical cryptocurrency investor is under age 40 and lacks a college degree, the NORC survey reports. Those interested in cryptocurrency come from diverse backgrounds, as 44% of traders don’t identify as White and 41% are women.

However, questions remain from the general public about how cryptocurrency works. The top reason that NORC survey respondents didn’t put money toward cryptocurrency is because they reported not understanding it enough.

“Cryptocurrencies may have staying power as an investment option, but our hunch is that they will continue to lag behind more traditional investment opportunities for the foreseeable future,” said Mark Lush, a manager in the Economics, Justice, and Society department at NORC, in a press release for the survey.

Tesla Inc. CEO Elon Musk is among the public personalities who are outspoken about experimenting in crypto. The billionaire warns to use caution.

“Don’t bet the farm on crypto!” he tweeted on Oct. 24. “True value is building products & providing services to your fellow human beings, not money in any form.”

To contact the reporter on this story: Megan U. Boyanton in Washington at mboyanton@bgov.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Robin Meszoly at rmeszoly@bgov.com