Oct. 2, 2023 – While we recognize and appreciate the intent behind the ‘Off-Chain Digital Commodity Transaction Reporting Act’, to enhance transparency and protect consumers, we believe that certain provisions in the bill may inadvertently hinder the growth and innovation of the digital asset industry, while threatening consumer protections.
A central issue is the bill’s mandate for individuals to report all on-chain swaps to designated repositories in real time. Specifically, for digital commodity sales not executed on a platform, the bill would mandate individual purchasers to report the transaction to a digital asset repository immediately after execution. This presents feasibility challenges due to the decentralized nature of these assets, potentially creating bottlenecks that risk consumer protection.
Moreover, the mandated exhaustive reporting coupled with the extensive access granted to various entities exponentially magnifies privacy concerns. The bill allows a broad spectrum of entities to access sensitive user data, ranging from domestic regulators to foreign authorities. This extensive access, without stringent safeguards, leaves the door open for potential unauthorized disclosures, data breaches, and misuse of sensitive transactional information. The risks associated with such extensive data access could erode consumer trust, compromise individual privacy rights, and potentially expose users to various forms of cyber threats and fraud.
Off-chain transactions, such as those facilitated by Bitcoin’s Lightning Network, offer the benefits of faster transaction speeds, reduced fees, and enhanced scalability. These transactions are especially beneficial for frequent, small transactions between the same parties. The proposed reporting requirements in the bill could undermine these benefits by imposing significant administrative burdens on trading platforms and potentially slowing down the transaction process.
In our ongoing dialogue with Congress members, our emphasis will be on advocating for workable, practical regulations that resonate with the unique attributes of digital assets. The Chamber will continue to advocate for a nuanced and balanced approach that aligns with the unique technical dynamics of the industry, stringently safeguards user privacy, and robustly ensures consumer protection.