Introduction and summary
When Congress enacted the Commodity Futures Modernization Act in December 2000, it exempted a novel financial product—financial derivatives contracts—from “[o]utdated statutes.”1 With the goals of “promoting financial innovation” and bringing derivatives regulations “into the new century,” Congress declared that the law “modernizes the regulatory structure of the U.S. futures markets and provides greater legal certainty.”2 Yet immediately, these contracts were used for speculation, and the derivatives markets septupled in size only to collapse fewer than eight years later, plunging the global economy into the most severe financial crisis in nearly a century.3
Despite the recency of this experience, Congress is again being asked to exempt novel financial products—crypto assets such as cryptocurrencies—from existing statutes.4 Advocates of these assets argue that because the financial laws are “behind the times” and based on “outdated principle[s],” Congress must act to “[f]oster innovation,” “[b]roaden access,” and provide “[r]egulatory clarity” to these products.5 With a collective market capitalization peak of $2.9 trillion in November 2021, there is little reasonable debate over whether crypto assets should be federally regulated.6 Rather, the debate is about how they are or should be regulated.
Crypto assets cannot be easily pigeonholed into one asset…
