A new bill has been introduced in the United States that would require cryptocurrency service providers to report all blockchain transactions to a government repository. The bill, known as the “Off-Chain Digital Commodity Transaction Reporting Act,” was introduced by U.S. Democrat Representative Don Beyer on September 28.
The purpose of the legislation is to protect cryptocurrency investors from disputes, manipulation, and fraud that may arise from off-chain transactions. Off-chain transactions refer to transactions that occur beyond the blockchain network and are not instantly logged on a blockchain. These transactions often take place through secondary layers, which makes tracking them more challenging.
The rise of trading platforms and the desire to increase transaction times and reduce costs have led to the emergence of thousands of off-chain transactions that are not recorded on the publicly viewable blockchain. This lack of transparency can leave investors and consumers vulnerable to fraud and manipulation, according to Beyer.
To address these concerns, the bill proposes that crypto service providers must report all off-chain transactions to a Commodity Futures Trading Commission (CFTC)-registered trade repository within 24 hours. The requirements outlined in the bill are similar to those for securities and swaps transactions.
The introduction of this bill reflects the ongoing focus of U.S. lawmakers on cryptocurrency regulations. In September, nine U.S. Senators expressed their support for Senator Elizabeth Warren’s Digital Asset Anti-Money Laundering Act. This legislation targets noncustodial digital wallets and aims to extend Bank Secrecy Act responsibilities, among other measures intended to combat the illicit use of digital money.
The need for increased regulation in the cryptocurrency space stems from the growing popularity and potential risks associated with digital currencies. While cryptocurrencies offer numerous benefits, including faster transaction times and reduced fees compared to traditional financial systems, they are also vulnerable to fraudulent activities.
By ensuring that all off-chain transactions are reported to a government repository, the U.S. government aims to bring more transparency and confidence to the digital asset market. This will provide investors and consumers with a higher level of protection against fraud, manipulation, and other illicit activities.
It is worth noting that the legislation is still in its early stages and will require further discussions and potential amendments before becoming law. However, the introduction of such a bill highlights the increasing importance of regulating the cryptocurrency sector to ensure its long-term viability and protect the interests of market participants.