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New legislation in the US mandates companies to disclose off-chain transactions to the CFTC.
A new legislative proposal in the United States seeks to mandate that cryptocurrency service providers report all blockchain transactions to a government repository.
On September 28, U.S. Representative Don Beyer presented the “Off-Chain Digital Commodity Transaction Reporting Act,” which requires trading platforms to submit all transactions to a repository recognized by the Commodity Futures Trading Commission.
The proposed law aims to safeguard cryptocurrency investors from disputes, manipulation, or fraud that may arise from off-chain transactions or those occurring outside the blockchain network. Unlike on-chain transactions, off-chain crypto transactions are not immediately recorded on a blockchain but are processed through secondary layers, which can complicate tracking efforts.
With the rise of trading platforms and the push to enhance transaction speeds and reduce costs, numerous transactions occur “off-chain” and remain unrecorded on the publicly accessible blockchain, as noted in the announcement.
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“Unfortunately, internal record keeping among these private entities can vary wildly, and this can leave investors and consumers vulnerable to fraud and manipulation,” Beyer stated, adding:
“This bill is a common-sense measure to restore some transparency and confidence to the digital asset market.”
As per the bill, crypto service providers will be obligated to report all off-chain transactions within 24 hours to a CFTC-registered trade repository. The announcement highlights that these requirements are akin to the regulations governing “virtually all securities and swaps transactions.”
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U.S. lawmakers have recently been paying close attention to cryptocurrency regulations. In mid-September, nine U.S. senators expressed their support for Senator Elizabeth Warren’s Digital Asset Anti-Money Laundering Act. Reintroduced in July 2023, the legislation in its current iteration aims to address noncustodial digital wallets and expand Bank Secrecy Act obligations, among other legal measures, to combat the illicit use of digital currency.
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