AILSA CHANG, HOST:
All right. Things change very quickly in the world of cryptocurrency. In November, it was surging.
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UNIDENTIFIED REPORTER: Bitcoin breaking out to an all-time high on Tuesday as the red-hot asset gains momentum.
CHANG: In February, it was all over Super Bowl ads from, like, Tom Brady...
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TOM BRADY: FTX is the safest and easiest way to buy and sell crypto. It's the best way to get in the game.
CHANG: ...To Matt Damon.
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MATT DAMON: Fortune favors the brave.
CHANG: But only a month later, the crypto market started to turn.
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UNIDENTIFIED REPORTER: Well, I don't need to tell anyone this, but it's been a rough year for crypto.
CHANG: In over just a couple weeks in May, cryptocurrencies lost more than half a trillion dollars in market value. That had both the crypto industry and crypto skeptics calling more loudly for some regulation of the market.
And this week Senators Kirsten Gillibrand, Democrat of New York, and Cynthia Lummis, Republican of Wyoming, presented the first comprehensive crypto regulatory bill. The day it came out, we spoke with them about why they put together this legislation. Here's Cynthia Lummis first.
CYNTHIA LUMMIS: We both have supported the dual ultimate goal of allowing innovation to continue to occur but, at the same time, providing a regulatory framework so people who are innovating in this space know the rules of the road and people who are consuming the ultimate products know that the consumer protection elements are there.
CHANG: This bill would shift a lot of the regulatory power over crypto assets to the Commodity Futures Trading Commission, or CFTC, and not the Securities and Exchange Commission, the SEC. Why hand most of the regulatory power to the smaller agency? I know that the current SEC chairman, Gary Gensler - he's taking a fairly aggressive position towards crypto. How do you respond to concerns out there that maybe lawmakers are folding to some industry pressure by placing regulatory power for larger cryptocurrencies, mainly with the CFTC, the smaller agency?
KIRSTEN GILLIBRAND: So it just makes more sense. It would be inappropriate for the SEC to regulate some of these markets because they don't function like securities. A security is more akin to when a company wants to raise money so that it can fund its company. That's a stock. Chair Gensler has already said - he's literally said the words that bitcoin is a commodity because he understands that it's a form of value in the same way that gold is a form of value, in the same way that oil is a form of value and that it's more appropriately placed under the CFTC.
CHANG: So when you were putting this bill together, did the SEC ask for greater regulatory power than it is currently given in this version of the bill?
GILLIBRAND: It's not the SEC or the CFTC's responsibility to ask for power or oversight. It is Congress' job to regulate this industry. That is why Cynthia and I have come together - to make the analysis of where is the appropriate regulation. Congress has to write laws. They have to implement them.
CHANG: I also want to talk about the environmental cost to this industry because blockchain technologies that crypto runs on - I mean, it requires massive amounts of energy to power the computers that make it possible. How does this bill address those environmental concerns?
GILLIBRAND: One of the concerns that I share is what is the environmental impact of this industry. And so what we are doing is creating a disclosure mechanism where industry players can disclose what energy they're using, how they're acquiring the energy and what the environmental impacts are. And so this potentially could be a huge opportunity for renewable energies because different bitcoin miners that decide to use renewable energies or create a market for renewable energies will be helping us with our energy transition.
CHANG: But if there are disclosures that reveal that there are substantial environmental costs to certain crypto mining or certain crypto transactions, what happens next? It's just up to the consumer to decide?
GILLIBRAND: Absolutely. People who care about supporting renewable energies and care about climate change - they will make their choices based on the information they now will have. Without a regulatory framework, you have no mechanism to get that information.
LUMMIS: And coming from my state of Wyoming, which is an oil- and gas-producing state, we have bitcoin-mining equipment being moved right next to flared gas, wasted gas that is being flared into the atmosphere. They can hook right up to it and mine bitcoin from an asset that's being wasted and turn it into a useful product. So there are advantages to bitcoin mining even within a fossil fuel-dominant system.
CHANG: You both have a lot of faith in crypto. You both would like to attract crypto businesses to your states. I'm curious - what is your message to the crypto skeptics out there who have seen the sell-off and who are worried that this could be just one massive house of cards? What would you like to tell them to reassure them?
GILLIBRAND: Well, I would simply say that the industry today is the wild, wild west. And so if they want to ever be able to invest in any cryptocurrency that the first thing they'd want to see is that the United States actually regulate the industry. Once you create a framework where the SEC and the CFTC and the IRS and the OOC have jurisdiction over all of these digital assets, you have the framework of our entire banking and financial services and commodities industry putting the safety and soundness and the transparency and accountability over the industry. So it will work.
CHANG: That was Democratic Senator Kirsten Gillibrand of New York and Republican Senator Cynthia Lummis of Wyoming.
The crypto industry has responded positively to this bill. The Blockchain Association called it a, quote, "milestone moment." The Crypto Council for Innovation called it a significant step forward. Crypto skeptics, on the other hand...
MOLLY WHITE: I feel like it is very much what I think the cryptocurrency industry was hoping to see from regulators, which is a very limited set of regulations applied to the industry.
CHANG: That is Molly White. She tracks crypto fraud and failure on the blog Web3 Is Going Just Great, and she was among several tech experts to sign a letter urging Congress to, quote, "take a critical, skeptical approach to crypto legislation." She took issue with how this bill classifies a lot of crypto as commodities to be regulated by the CFTC as opposed to classifying it as securities to be regulated by the much larger SEC, the agency the crypto industry views as less friendly.
WHITE: Cryptocurrencies are more like securities because, you know, people broadly put money into them hoping for a return on their investment. And when someone is engaging with something as an investment, that's a good sign that it should go to the SEC. Commodities are things like wheat or oil, and, you know, cryptocurrencies have no intrinsic value that would broadly put them alongside those types of things.
CHANG: She also noted the environmental impact section of this bill only pledges to study crypto's energy use rather than put any actual environmental restrictions on it. And ultimately, she says the legislation - it's a step backwards for potential crypto buyers.
WHITE: My strongest hopes for cryptocurrency regulation are strong consumer protections that allow for both consumers to understand what they're getting into as well as recourse when things go poorly as well as really strong disclosure and registration requirements for these types of projects that have been operating completely unregulated. And I think that the bill that we're seeing features neither of those things.
CHANG: That was Molly White, who writes the blog Web3 Is Going Just Great.
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