U.S. Representative Don Beyer, a Democrat from Virginia’s 8th District, is championing a proposal aiming to create centralized databases for off-chain cryptocurrency transaction information.
Introduced on September 27, the “Off-Chain Digital Commodity Transaction Reporting Act” mandates cryptocurrency trading platforms to submit all transaction details to a repository overseen by the Commodity Futures Trading Commission (CFTC).
Off-chain transactions typically bypass the blockchain, resulting in the absence of a network record documenting the financial specifics of the transaction. Due to this characteristic, certain off-chain methods might be at a heightened risk of cyberattacks and data compromises.
“As trading platforms evolve and there’s a growing demand for faster transactions and reduced costs, countless transactions are conducted ‘off-chain’ daily, bypassing the publicly accessible blockchain,” stated the congressman.
Referring to his bill, Congressman Beyer described it as a “pragmatic step” to address privacy concerns and “reintroduce transparency and trust” for users throughout the cryptocurrency industry. He further commented, “Given the inconsistency in internal record-keeping practices among these private platforms, investors and users are potentially exposed to deceit and market manipulation. This legislation aims to reintroduce clarity and instill trust in the digital currency landscape.”
Beyer is optimistic that channeling off-chain transaction information to centralized databases accessible to regulatory bodies would prevent scenarios reminiscent of an FTX-like downfall.
What Does the Bill Say?
The comprehensive bill specifies that each digital asset exchange, regardless of whether it’s cleared or not, must be reported to an accredited swap data repository. Furthermore, all sales involving digital commodities are mandated to be reported to the designated repository for cryptocurrency transactions.
The bill underscores the immediacy required in reporting, mandating trading platforms to record every transaction promptly upon execution.
Beyer emphasized, “This proposal mandates that all off-chain digital asset dealings be logged within a 24-hour timeframe to a trade repository registered with the CFTC. This is akin to the reporting standards set for the vast majority of securities and swaps transactions.”
Last year, Beyer pioneered the introduction of the Digital Asset Market Structure and Investor Protection Act, a legislation designed to safeguard consumers while fostering technological advancement in the sector.