As the crypto policy world debates the future of stablecoins and the legal culpability of decentralized autonomous organization (DAO) governance voters, don’t sleep on the Digital Commodities Consumer Protection Act (DCCPA). The bipartisan bill co-sponsored by leaders of the Senate Agriculture Committee endeavors to answer a couple of key questions confounding crypto lawyers: when should crypto tokens be treated like commodities as opposed to securities, and how should the exchanges on which these tokens trade be regulated.
While the DCCPA helpfully codifies bitcoin and ether as digital commodities under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC), it leaves a great deal of the line drawing between crypto securities and crypto commodities uncertain. In addition, in requiring all platforms for buying, selling, and trading crypto tokens to register with the CFTC and comply with other mandates, the DCCPA poses serious challenges to decentralized finance (DeFi). To defend creative dynamism in DeFi, any registration of decentralized crypto token exchanges (DEX) ought to be strictly voluntary.
Jack Solowey is a policy analyst at the Cato Institute’s Center for Monetary and Financial Alternatives. Jennifer J. Schulp is the director of financial regulation studies at the CMFA.
Cryptocurrencies are innovative because they allow users to store and send value all over the world without the intermediation of trusted third parties. DeFi takes this innovation a step further, disintermediating not only token transfers but also a variety of other financial transactions – from making and taking out loans to trading different types of crypto tokens to creating novel insurance arrangements.
In lieu of financial middlemen, DeFi uses self-executing smart contracts deployed on cryptocurrency blockchains to deliver financial instruments when specified conditions are met. For example, if a user locks the appropriate collateral in a lending…
