New Bill Requires Reporting of Off-Chain Crypto Transactions
A new bill seeks to require cryptocurrency service providers to report all blockchain transactions to a government database.
On September 28th, U.S. Representative Don Beyer introduced the “Off-Chain Digital Commodity Transaction Reporting Act,” which requires trading platforms to report all transactions to a Commodity Futures Trading Commission registered repository.
The new legislation seeks to safeguard cryptocurrency investors from potential disputes, manipulation, or fraud arising from off-chain or blockchain-less transactions.
Off-chain crypto transactions, in contrast to on-chain transactions, are not instantly recorded on a blockchain but are instead processed through secondary layers, generating tracking difficulties.
The announcement notes that thousands of transactions occur “off-chain” and are not recorded on the publicly accessible blockchain as a result of the emergence of trading platforms and the desire to increase transaction speeds and reduce costs.
“Unfortunately, internal record keeping among these private entities can vary wildly, and this can leave investors and consumers vulnerable to fraud and manipulation,” Beyer wrote, adding:
“This bill is a common-sense measure to restore some transparency and confidence to the digital asset market.”
The bill requires crypto service providers to disclose all off-chain transactions to a CFTC-registered trade repository within 24 hours.
According to the announcement, the requirements are comparable to those for “virtually all securities and swaps transactions.” Recently, lawmakers in the United States have been intensely focused on cryptocurrency regulations.
In mid-September, nine senators added their support to the Digital Asset Anti-Money Laundering Act proposed by Senator Elizabeth Warren.
Reintroduced in July 2023 in its current guise, the legislation intends, among other legal measures, to crack down on noncustodial digital wallets and extend Bank Secrecy Act responsibilities to combat the illegal use of digital currency.