GOP leaders urge Treasury to strengthen digital asset spot market

Republican leaders on the U.S. House Agriculture Committee and the Financial Services Committee are calling on Treasury Secretary Janet Yellen to improve federal oversight of the spot market for digital assets that are not securities, such as crypto assets. 

Despite the Financial Stability Oversight Council (FSOC) identifying regulatory gaps in the digital asset spot market, regulators have failed to facilitate an environment that ensures consumer protection and fosters digital asset innovation in the United States, according to a Feb. 6 letter to Yellen that was led by U.S. Rep. Glenn “GT” Thompson (R-PA), chairman of the House Agriculture Committee, and House Financial Services Committee Chairman Patrick McHenry (R-NC). 

Also signing the letter were U.S. Rep. French Hill (R-AR), chairman of the Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion, and U.S. Rep. Dusty Johnson (R-SD), chairman of the Agriculture Subcommittee on Commodity Markets, Digital Assets, and Rural Development.

The lawmakers noted that following the collapse of cryptocurrency exchange FTX, they introduced legislation in 2023 sponsored by Rep. Thompson called the Financial Innovation and Technology Act for the 21st Century (FIT21) Act, H.R. 4763. The bill would give federal regulators clear authority over the digital asset spot markets. 

“Over a year after the collapse of several digital asset firms and the associated customer losses, digital asset firms continue to operate despite the ongoing gaps in federal oversight,” the congressmen wrote in the letter to the Treasury Secretary, who also serves as chair of the FSOC. “FIT21 provides comprehensive oversight of the spot market for digital assets that are not securities and closes the gaps repeatedly identified by FSOC.”

To understand how FSOC facilitates coordination and communication between the Securities and Exchange Commission and the Commodity Futures Trading Commission (CFTC) as it relates to federal oversight of the spot market for digital assets that are not securities, the congressmen asked Yellin to answer a series of questions. For example, noting that the CFTC has anti-fraud and antimanipulation authority over segments of the non-security digital asset market, the lawmakers asked Yellin if it is the Council’s view that expanding the CFTC’s jurisdiction to encompass the spot market in non-security digital assets is appropriate.