This week a draft copy of the Digital Commodities Consumer Protection Act (the DCCPA) appeared online. The DCCPA is a new draft piece of legislation being developed by Senators Debbie Stabenow and John Boozman, the top Democrat and the top Republican (respectively) on the Senate Agriculture Committee, which oversees the CFTC. This bill is actually broken out from the Lummis-Gillibrand draft bill, a measure that represents a promising attempt to establish some basic rules of the road to regulate digital assets. The fact that the bill has strong bipartisan Senate support is critical—the longer web3 remains a bipartisan issue, the better the chances of getting smart rules. The version of the DCCPA being circulated is driving a fair amount of conversation and, understandably, generating anxiety among those of us who care about DeFi.
The language included in the version shared online can and should be improved. What was shared online is a work in progress draft and part of a process that starts with putting down early language so others can react. The early stages of legislative drafting are the time to provide constructive, serious feedback, because policymakers want to hear it. Again, circulating versions of this bill are not final.
New rules for DeFi, as in other areas of web3, need to answer the core question at the heart of a longstanding debate about technology: should the government regulate the development of open-source software protocols? We believe the most effective place to regulate web3 is at the application layer, not the protocol layer. This approach should allow for smart policy and rule of law, and gives builders the runway they need to innovate. The CFTC should ensure access to safe, regulated onramps to DeFi for everyday users. The bill should:
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Provide a clear definition of a “digital commodity” so builders and regulators can understand the lines.
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Separate out DeFi protocols so that they’re treated differently from centralized applications that provide analogous services.
DeFi is an important piece of the larger web3 ecosystem with the potential to provide improved alternatives to big banks. Instead of relying on costly, opaque, centralized intermediaries to make decisions around how and when you can access assets, DeFi relies on open-source protocols that operate accountably, transparently, and continuously. Policymakers around the world are thinking through how to manage the opportunities and risks associated with DeFi, and the European Commission put out an extensive paper on the subject today.
In the U.S. when lawmakers decide they want to develop new rules, they generally kick off a long, complex effort to solicit feedback from stakeholders and circulate updated drafts. It’s important to note, there is no guarantee that the bill will move forward during this Congress. It’s likely that it will be reintroduced next year. However, if the Agriculture Committee does decide to proceed, they will hold a “mark-up” session, when members of the committee will update the bill in response to feedback they’ve received from us and others in the community. There is an enormous amount of engagement underway right now—including by our team—to ensure lawmakers have access to good information and understand the consequences of the draft as written in advance of those deliberations. You can help:
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Write or call your Senators and Representatives in Congress, especially those on the Agriculture Committee in the Senate or House.
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Lay out a clear, positive case for why DeFi is good for the world and why any new legislation should help the field grow.
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Cite the bill (S.4760) as both a risk and an opportunity to get this right.
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If possible, participate in Town Hall meetings, fundraisers, and campaign events where you can speak with elected officials and voice your concerns and hopes for DeFi.
Once the mark-up session is done, the legislation will be significantly closer to its final form and the community will have a better basis for determining whether to support it. Until then, we should participate in the process. We’ve been in plenty of sessions with policymakers and their staffers where they tell us: “We took our best crack at it. The most helpful thing you can do now is to send your feedback.”
There is still enough runway left to improve the bill and deliver a win for the future of DeFi and web3. Let’s use it.
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