Last week, Sam Bankman-Fried (SBF) was criticized when a leaked draft of crypto legislation revealed a controversial clause that would severely regulate DeFi.
The first major headline from the leaked draft is the proposal that crypto be regulated by the Commodity Futures Trading Commission (CFTC) instead of the Securities and Exchanges Commission (SEC) — which just happens to be one of the core principles that SBF has been proposing for some time. Former CFTC Commissioner Jill E. Sommers also sits on the board of FTX US.
The leaked draft bill, called the Digital Commodities Consumer Protection Act, was presented to the Senate by Debbie Stabenow and John Boozman who are both funded by SBF. Head of Policy of the Blockchain Association, Jake Chervinsky, applauded the bill, particularly as it designates Bitcoin and Ethereum as commodities. However, he also claims that its definition of a “Digital Commodity” is too open to the extent that the SEC can still argue in favor of cryptocurrencies being designated as securities.
Chervinsky also states that the definition of what constitutes a “Digital Commodity Platform” may result in an unintended ban on DeFi since it can be applied to anyone using DeFi protocols with the consequence of retail traders being regulated as if they are exchanges themselves.
The bill also comes with provisions for the CFTC to analyze decentralized protocols and come up with consumer protection measures to protect retail buyers from frauds and scams. SBF further emphasized the importance of consumer protection in a tweet published yesterday, saying that the customer should be notified of the risks and that gatekeeping should be done on the basis of their understanding of the product. This would apparently be achieved via some form of quiz or test to gauge a client’s knowledge.
His knowledge-based gatekeeping principle has also been outlined in a recently published blog post that lists his proposed crypto standards.
SBF is currently the top crypto-industry donor to politicians and has succeeded in positioning himself as a main industry reference point to the legislative process. So far this year, he’s spent more than $40 million on donations but is still some way short of the $1 billion he originally promised.
SBF says thanks for the backlash
The curly-haired billionaire caused a stir last week when he published his Possible Digital Asset Industry Standards. The blog post was billed by SBF as “a set of standards that we as an industry could enact to create clarity and protect customers while waiting for full federal regulatory regimes.” He also referred to it as an “industry norms manual.”
Over the course of the draft, SBF tackled everything from blocking sanctioned addresses and giving hackers a cut of stolen crypto, to deciding whether to list an asset as a security and regulating stablecoins.
Despite his efforts, the proposal wasn’t particularly well received and SBF was accused of risking the United States’ position in the crypto race. Yesterday, the FTX boss responded to the criticisism. He thanked the community for its (sometimes severe) feedback and revealed that he’s amended the proposal.
“I’ve revised my post some already, and will continue to do so.”
These revisions include clarification of how he sees his proposed changes impacting the DeFi space in particular.
“It is not making claims about what DeFi devs, smart contracts, and validators must do,” he explained. “It’s looking to eventually establish guidelines about how e.g. FTX’s platform—or Fidelity’s—could interface with DeFi contracts.
“This gets right what the infrastructure bill a while ago got wrong: that devs and validators aren’t platforms, and shouldn’t be regulated as such. Which is a huge step forward!”