The two bills take into account the lack of clarity in providing a regulatory framework for cryptocurrency and direct regulatory bodies to have a comprehensive system in place for both the consumers and enterprises. The main aim of the bill is to minimize the chances of price manipulation in wake of the Attorney General’s report which highlighted the risk of price manipulation.
The first bill calls upon the CFTC to describe how price manipulation could take place in virtual markets. It also directs the regulator to make recommendations for regulatory changes that can improve its monitoring procedures in preventing price manipulation.
The second bill directs the CFTC to conduct a comparative study of the crypto regulation in other countries and then make recommendations for regulatory changes to promote competitiveness in the U.S.
In a joint statement, Soto and Budd said:
“We must ensure that the United States is at the forefront of protecting consumers and the financial well-being of virtual currency investors, while also promoting an environment of innovation to maximize the potential of these technological advances. This bill will provide data on how Congress can best mitigate these risks while propelling development that benefits our economy. ”
The Virtual Currency Consumer Protection Act, directs the CFTC to describe aspects of how price manipulation could happen in virtual markets and then to make recommendations for regulatory changes that can improve the CFTC’s monitoring procedures in preventing price manipulation. Click here for the full text of the Virtual Currency Consumer Protection Act.
Lawmakers Claim Crypto Can Drive Economic Growth
As we already mentioned, in their statement Soto and Budd underscored the “profound potential” of cryptocurrencies and blockchain, the technology underpinning bitcoin.
Soto and Budd said the laws they proposed would protect consumers and investors without dampening the “environment of innovation” that would maximize the potential of these groundbreaking technologies. Most recently, a bipartisan bill was introduced that proposed creating a “consensus-based definition of blockchain” in October.
Earlier in September, the New York Office of the Attorney General released a report on cryptocurrency trading platforms, finding that many are susceptible to market manipulation “The industry has yet to implement serious market surveillance capacities, akin to those of traditional trading venues, to detect and punish suspicious trading activity,” the report stated.
The U.S. Department of Justice is also looking into crypto market manipulation, reportedly most recently focusing on whether Bitfinex exchange and Tether Ltd. have supported bitcoin’s price using the tether stablecoin.
Also this year, Soto, Budd and other prominent lawmakers talked to the chairman of the Securities and Exchange Commission (SEC), Jay Clayton, and asked him to clarify whether Initial Coin Offerings (ICOs) can be considered sales of securities or not, something that the chairman did not explain at the time as the whole question is very muddled right now.
Introducing a Pro-ICO and Crypto Legislation
We already wrote yesterday how Warren Davidson, the biggest bitcoin enthusiast in Congress was set to introduce a new pro-ICO and crypto legislation. He believes that cryptocurrencies can thrive in a Federal-regulated environment.
The bill, when finalized, would create an ‘asset class’ focused on tokens only. The new bill will prevent cryptos from being classified as securities. However, the new law would let the federal government regulate ICOs more effectively. The announcement came at a four-day blockchain conference in Cleveland. The Ethereum co-founder, Joseph Lubin, was also in attendance.
While bitcoin itself has been around for a decade, the cryptocurrency fundraising method known as initial coin offerings began attracting billions of dollars from retail investors at the end of last year. Regulators and lawmakers were caught unprepared as many ICOs turned out to be frauds, backed merely by abstract ideas or in some cases nothing at all.
Wall Street has already focused on market manipulation control meanwhile, Nasdaq in October claiming its financial instruments could help mitigate the practice.
Also, it’s important to emphasize that there were similar cases when, in October this year, one Bitfinex employee, with access to insider information, has shared details of the Bitfinex investigation in regards to the anomalous growth of Bitcoin and decrease in the USDT. According to the employee, Bitfinex itself was not connected to the situation. Although, a third-party connected network of trading bots, that were set up for massive USDT sales, were implicated in the Bitcoin exchange rate manipulation.