- Regulatory FUD, will it ever end? Actually, yes.
- The DCCPA could take power from Gensler's SEC and yield it to the CFTC
- Why does it matter? The CFTC will declare crypto a commodity, not a security = bullish
- Could it be bad? The bill has no idea how DEXs work–so it's bad for DeFi, good for tokens
Another day, another bill from an out-of-touch Congress... except FINALLY, this bill could give clarity on key questions that have never been definitively answered by US regulators. The Digital Commodities Consumer Protection Act will have a huge say in determining the future of crypto. With the legislation making labored progress through the Senate, should investors wait or place their bets now?
Security or commodity?
The DCCPA will determine how much regulatory power the SEC has over crypto; it'll answer whether tokens are classed as securities or commodities. Gary Gensler's regulatory sabre rattling has plagued the markets in recent times. He wants the SEC to take control of crypto regulation and declare all tokens securities. This would be bearish for the industry as securities are tightly regulated, commodities less so. There is hope that this doesn't occur.
The debate may soon be settled.
If passed, the DCCPA would take jurisdiction away from the SEC and give it to the Commodity Futures Trading Commission instead. Not only is the CFTC considered less aggressively interventionist than the SEC, but the two organizations have repeatedly clashed over how to regulate crypto. Handing control over to the CFTC would seemingly pave the way for all tokens to be declared commodities. It would almost certainly pump Bitcoin, Ethereum and (presumably) many other tokens if they fell under CFTC jurisdiction.
More power to exchanges?
The Act would also give greater powers to exchanges, allowing them to have a say in whether individual tokens are classed as securities or commodities. It was drafted as an attempt to reduce financial ambiguity and protect exchanges long before FTX went under. Unfortunately, SBF’s prior lobbying for this bill has attracted criticism and potentially tainted it in the short term.
There are fears for DeFi.
Also criticized is how the bill will affect “true” DeFi business models (rather than centralized exchanges like Binance). Many argue that it unfairly impacts and limits DEXs, who would be unable to comply if brought under CFTC jurisdiction. DEXs would be required to hold customer assets in a manner that reduces risk of loss (even though they are by definition self-custodial) and appoint compliance operators despite being operated via smart contract.
The Future
While there are some fears about specific policy points within the DCCPA, most importantly of all, the proposals would bring clarity if passed. Simply having an answer on regulation, even if the policies are restrictive, will bring investors confidence. Ambiguity is worse than intervention. There is a widely shared belief that sovereign wealth funds, and large pension plans, are waiting for regulators to set their policies before they allocate a percent or two of their funds into crypto. These are some of the deepest pools of cash in the world. For example, if and when the Saudi's royal investment manager apes into Bitcoin and Ethereum, the amount invested will pump the market noticeably.
Pondering the impact of DCCPA is one thing, but will it pass? Debbie Stabenow, one of the act's big supporters, has announced that she will resign in 2025 and focus on legislation that affects the "lives of Michiganders.” Co-author and big supporter John Boozman remains in place until at least 2029. Hopefully the notoriously slow legislators of D.C. can get their votes together soon. Revolutionary and controversial, one thing is certain, the DCCPA’s successful or unsuccessful passage will send shockwaves through the markets.
