• Grant the CFTC (largely) exclusive jurisdiction over most digital assets – RFIA would grant the CFTC “exclusive jurisdiction over any agreement, contract, or transaction involving a contract of sale of a digital asset in interstate commerce, including ancillary assets.”
  
  
  • Importantly, RFIA would establish a new class of digital assets, which the bill refers to as “ancillary assets.” The bill attempts to differentiate “ancillary assets” (to be classified as commodities regulated by the CFTC) from “securities” (which fall under the SEC’s purview). The new “ancillary asset” class would not encompass more traditional securities, including equity interests in an issuer, profit or revenue share interests, and entitlements to dividends; these would remain under the SEC’s jurisdiction. However the bill adopts the view that digital tokens or other “ancillary assets” may be offered alongside securities (e.g., equity interests in a company developing a crypto project), without the ancillary assets themselves constituting securities.
  • While ancillary assets would be subject to the exclusive jurisdiction of the CFTC, the issuers of securities associated with them would have disclosure requirements subject to the SEC’s jurisdiction.
  • The classification of “ancillary assets” as commodities rather than securities is a “rebuttable presumption” – which can be challenged in federal court. Thus a court could determine that there is not a substantial basis to treat the ancillary asset as a commodity, in which case it would not escape regulation as a security.
  • Authorize the CFTC to oversee digital asset exchanges – RFIA would add a new section to the Commodity Exchange Act outlining the process of registering with the CFTC as a digital asset exchange, and governing the terms of trading on such exchanges. Registration as a digital asset exchange would be voluntary, and exchanges that choose to register would be subject to RFIA’s “Core Principles for Digital Asset Exchanges.”
• Direct the CFTC and SEC to study the creation of a “self-regulatory organization” that would play “a complementary role, working with regulators to allow them to be more nimble and efficient, while maintaining strong supervision.”

As noted above, RFIA also attempts to implement a regulatory framework for a class of digital assets that has recently garnered significant public attention – stablecoins. While this post does not include a detailed analysis, it is worth noting that the bill would require 100 percent reserves of “high-liquid assets” for all outstanding liabilities of stablecoin issuers, and require certain disclosures. The bill also would allow banks and credit unions to issue payment stablecoins.

Time will tell whether and how many of the provisions proposed by RFIA will survive and become law. Questions about the CFTC’s capacity to take on this herculean task, given its relatively limited resources, will no doubt be raised. On that score, RFIA contemplates a regime that would allow the CFTC to collect fees from registered entities for activities associated with regulation of the digital asset markets in order to offset the costs of such regulation. RFIA also reserves the ability to fund the CFTC’s digital asset markets oversight through appropriations. Moreover, given its recent success in establishing a regime for regulating the vast swaps market and its long history working with complex derivative products and closely collaborating with other agencies, including the SEC, the CFTC appears to be particularly well suited to administer a novel regulatory scheme aimed at both regulating and fostering innovation in U.S. digital asset markets.

Finally, recent reports indicate that another digital asset regulation-focused bill will be introduced in the coming weeks, this one authored by Senators Debbie Stabenow (D-MI) and John Boozman (R-AR), the chair and ranking member of the Senate Agriculture Committee (the Senate committee with primary jurisdiction over the CFTC) respectively.³ This legislative proposal would apparently be more narrowly focused than RFIA, homing in specifically on empowering the CFTC to oversee digital asset spot markets. The Stabenow–Boozman effort is yet another sign that the CFTC is being viewed as the regulator of choice for the U.S. digital asset markets by prominent lawmakers from both sides of the aisle.

1. Lummis-Gillibrand Responsible Financial Innovation Act
2. Barbarino, Al, “CFTC Chief Says Crypto Bill Gets Regulatory Balance Right,” Law360 (June 8, 2022), available at: Law360.com
3. Sutton, Sam, et. al., “The battle over crypto oversight,” Politico Morning Money (June 10, 2022), available at: Politico

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