What the Digital Commodities Consumer Protection Act (DCCPA) Means for Crypto

The Battle for the Soul of US Crypto Regulation

In the United States, a fierce debate is raging over who should regulate crypto and how. At the center of this debate is a landmark piece of proposed legislation: the Digital Commodities Consumer Protection Act (DCCPA). What is it, and how could it reshape the future of crypto in the world’s largest economy?

For years, the U.S crypto industry operated in a grey area oscillating between the desire for a free decentralized system and the harsh reality of regulatory crackdowns. In fact, many cryptocurrency networks were heavily penalized under the Biden administration for issuing unregistered assets.

What America has done up till this moment is regulation through enforcement, where agencies like the Securities and Exchange Commission (SEC) sue after the fact has been established.

Now, the narrative is shifting rapidly, and it’s no longer a question of whether crypto will be regulated, but who will hold the reins. At the centre of this question lies a landmark piece of proposed legislation: the Digital Commodities Consumer Protection Act (DCCPA).

Digital Commodities Consumer Protection Act of 2022. Source: U.S. Congress website

The Act is a bipartisan bill that seeks to build a comprehensive federal regulatory framework and formally recognize the Commodity Futures Trading Commission (CFTC) as a clear authority over blockchain activities.

This article will provide a clear and balanced overview of the DCCPA. We will explain the key provisions of the bill, analyze its potential impact on the crypto industry, and discuss its current status in the legislative process.

The Core of the Bill: The CFTC Takes the Lead

The primary issue the bill aims to resolve is the jurisdictional tug-of-war between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). If it is eventually passed into law, it will grant the CFTC exclusive jurisdiction over the crypto spot market for assets classified as “digital commodities”.

Currently, the CFTC regulates only derivatives, including futures, options, and swaps, and can police fraud in the spot market, but it lacks the power to register crypto exchanges or set day-to-day rules for spot trading. The DCCPA would change this dynamic entirely, giving the CFTC direct control over the spot market.

The bill also provides more context and definitions. For example, it broadly defines a “digital commodity” as “a fungible digital form of personal property that can be possessed and transferred person-to-person without necessary reliance on an intermediary.” This definition explicitly includes the largest cryptocurrencies by market capitalization, particularly Bitcoin (BTC) and Ethereum (ETH), which have major implications.

Under Gary Gensler and his predecessors, the SEC has frequently argued that the vast majority of crypto assets (excluding Bitcoin) are unregistered securities. The DCCPA’s redefinition thus provides a safe harbor from the SEC and rather places them with a regulator that views them on the same pedestal as gold and oil.

Why Does It Matter?

There are two major reasons why the DCCPA’s framework is significant for the crypto industry:

1. The Nature of the Asset: Crypto proponents argue that tokens function primarily as commodities or utilities rather than traditional securities. For example, crypto networks do not operate like corporations and cannot file quarterly earnings reports, pay dividends, or follow standard stockholder reporting practices. This makes the CFTC’s commodity-focused framework more adaptable and suitable for the unique characteristics of digital assets.
2. SEC stifles innovation: The SEC’s mandate is primarily to protect investors. In an industry as speculative and fast-moving as crypto, applying traditional securities rules can inadvertently stifle innovation. Shifting oversight to the CFTC, an agency with more flexibility for market growth and experimentation, may better support innovation while still providing safeguards for participants.

Key Provisions of the DCCPA

The Act introduces several major structural shifts in U.S. crypto regulation:

• Registration of “Digital Commodity Platforms”

Any entity facilitating or offering the exchange of digital commodities, such as Kraken, Coinbase, or Gemini, must register with the CFTC. The era of “seek forgiveness, not permission” is over. Exchanges will now be required to submit to regular audits, maintain a certain capitalization, and adhere to strict record-keeping standards.

• Consumer Protection and Fund Segregation

Trading platforms must hold customer assets separately from their own proprietary assets to protect investors from risky bets or operational failures. Exchanges are also required to implement robust cybersecurity programs and set up systems to report suspicious transactions. They must also make clear disclosures about the risk of trading while keeping advertisements of services within measured parameters.

• The End of “Regulation by Enforcement”

By creating a clear regulatory framework, the DCCPA reduces uncertainty around crypto trading in the U.S. This will encourage previously banned platforms to re-enter the market and support innovation that has been stifled for years.

• Lending and Borrowing Oversight

The bill also extends to crypto lending services. During the last bull cycle, many centralized finance (CeFi) lenders promised high yields that eventually collapsed. To prevent a recurrence, the Act requires these lending platforms to disclose the source of their profitability and the risks involved.

• Preemption of State Rules

Another laudable feature of the Act is the preemption of state-level regulations in relevant cases. For instance, the Act will override any state law on money transmission, virtual currency, and commodity brokering for platforms accredited by the CFTC. This way, there is no regulatory conflict.

• Prohibition for Market Manipulation

The Act prescribes strict penalties, including fines and imprisonment, for individuals and platforms engaging in fraudulent or manipulative trading practices.

• Exclusion for Consumer Use

The bill stated an exception for any transaction where a merchant or consumer uses a digital commodity solely to purchase or sell a physical good or service. That is, it will not regulate crypto payments for businesses.

• Energy Consumption Study

The Act mandates the CFTC to monitor the energy consumption and sources of energy used in the creation and transfer of the most widely traded digital commodities.

The Controversy and the Current Status

While the DCCPA may appear to offer a clear solution, it has sparked significant debate, which explains why the bill has yet to be passed into a binding law.

The SEC vs The CFTC: A Turf War

The SEC remains the biggest obstacle to the DCCPA’s passage, as the bill would essentially reduce its traditional oversight authority. The SEC has criticized the Act, arguing it could undermine broader financial regulations.

A key concern aired by the commission is that if crypto exchanges fall under the CFTC, other markets like traditional stock exchanges might seek similar reclassification to escape SEC oversight. Additionally, the SEC maintains that many digital commodities are effectively securities in disguise. The DCCPA, by shifting authority to the CFTC, could limit the SEC’s ability to police potentially illegal token offerings.

The DeFi Dilemma

Another major weakness of the DCCPA lies in its design, which primarily targets centralized entities like brokers and exchanges. The bill assumes there is a legally accountable human or company available for registration and oversight.

However, this assumption breaks down in the context of decentralized protocols such as Uniswap or Aave, where code runs autonomously on a blockchain without a central company or middleman. As a result, critics feared that the DCCPA could effectively ban DeFi operations in the U.S.

A draft of the DCCPA uploaded to GitHub by crypto attorney Gabriel Shapiro suggested some cushioning language for DeFi. It excluded developers and software publishers from the definition of “digital commodity trading facility,” a move intended to protect engineers and maintain some level of decentralization.

Still, critics, including Web3 startup accelerator Alliance DAO, argued that the bill forces human intermediation and pressures projects to sacrifice decentralization, potentially stifling innovation in the DeFi space. Vance Spencer, co-founder of Framework Ventures, also voiced strong opposition, stating that the venture capital firm “opposes the DCCPA and the shadow cabal that is trying to make it a reality.”

The FTX Connection

Another controversial layer to the DCCPA’s story is the early support from Sam Bankman-Fried, the founder of FTX. Before FTX’s remarkable collapse, he publicly backed the DCCPA and even spent millions lobbying Congress to pass the bill. As a result, the story becomes tainted by the FTX fraud saga.

Critics labelled it the FTX Bill and suggested SBF supported it because he believed he could manipulate the CFTC more easily than the SEC. However, this view is nuanced. Ironically, had the DCCPA been passed as law before 2022, its requirements for fund segregation and audits might have exposed the hole in FTX’s balance sheet sooner. Nonetheless, the bill’s reputation suffered with FTX’s collapse.

Where It Stands Now and The Path Forward

As of 2025, the DCCPA has not yet become law, remaining under negotiation in Congress. Recently, Senators John Boozman (R) and Cory Booker (D) released a revised bipartisan draft that refines key definitions such as “digital asset” and “qualified custodian,” clarifying which tokens would fall under the bill.

Despite the various setbacks, the core ideas of the DCCPA are very much alive. New legislative efforts, such as the “Financial Innovation and Technology for the 21st Century Act” (FIT21) and revised versions of the Lummis-Gillibrand acts, borrow heavily from the DCCPA framework, suggesting that compromise is likely over time.

Conclusion

The DCCPA is another confirmation that the asset class is not going away anytime soon, and innovation continues to breed demands for legal certainty. The DCCPA represents a significant step toward giving the CFTC primary authority over the crypto spot market, a move widely welcomed by the industry for bringing clarity and consistency.

By defining major cryptocurrencies as “digital commodities,” the Act would require exchanges, brokers, and custodians to register and comply with consumer-protection standards, while also preempting conflicting state regulations.

However, the Act faces key roadblocks, including drawing the line between the SEC and the CFTC’s powers, resolving the DeFi dilemma, and clarifying vague terms in the Act.

While the DCCPA may not pass in its current form, it marks a crucial milestone in the maturation of U.S. crypto regulation. Its proposals provide a potential roadmap for a future with a clear, workable framework that balances innovation and investor protection.

Ultimately, the future of the U.S. crypto market will be shaped in Washington, D.C., and investors can use Digitap to track their digital asset portfolio and stay updated on regulatory developments that could impact the broader market.

FAQs (Frequently Asked Questions)

What is the DCCPA?

The DCCPA, or Digital Commodities Consumer Protection Act, is a proposed U.S. federal law aimed at regulating the cryptocurrency spot market. It seeks to classify cryptocurrencies as digital commodities under the authority of the CFTC, rather than as securities. Originally introduced in 2022, a revised bipartisan draft has recently been released by the Senate Agriculture Committee.

What is the difference between the SEC and the CFTC?

The SEC (Securities and Exchange Commission) and the CFTC (Commodity Futures Trading Commission) are both U.S. financial regulators, but they oversee different markets. The SEC regulates securities, such as stocks and bonds, primarily to protect investors from fraud and malpractice. The CFTC oversees commodities like gold, oil, and derivatives, focusing on fair markets and preventing manipulation. Which regulator applies depends on whether the asset qualifies as a security or a commodity.

Is Bitcoin a commodity or a security?

Bitcoin is generally classified as a commodity. It has no central issuer or authority and does not meet the “Howey Test” criteria for an investment contract. While U.S. regulators occasionally debate classifications, it is widely treated as a commodity rather than a security.

Is the DCCPA good for crypto?

The DCCPA offers benefits for the crypto industry, including regulatory clarity, investor protection, and stronger market oversight. However, it has faced criticism for potential DeFi restrictions, privacy concerns, high compliance costs, and strict penalty provisions.

When will the U.S have a clear crypto regulation?

There’s no exact timeline for comprehensive U.S. crypto legislation. Like the early development of stock market laws, which took multiple market crashes before establishing the SEC, crypto regulation is evolving gradually. Recent measures, including the GENIUS Act for stablecoins, the CLARITY Act, and the proposed DCCPA, indicate significant progress. Over the next few years, the U.S. regulatory framework for cryptocurrencies is expected to stabilize and provide clearer guidance for investors and businesses.