On September 28, U.S. Representative Don Beyer introduced the “Off-Chain Digital Commodity Transaction Reporting Act,” which mandates trading platforms to report all transactions to a repository registered with the Commodity Futures Trading Commission (CFTC).

The new legislation aims to protect cryptocurrency investors from disputes, manipulation, or fraud potentially arising from transactions occurring off-chain or beyond the blockchain network. Unlike on-chain transactions, off-chain crypto transactions are not instantly recorded on a publicly viewable blockchain but are processed through secondary layers, creating some tracking challenges.

With the emergence of trading platforms and the desire to increase transaction times and lower costs, thousands of transactions occur “off-chain” and remain unrecorded on the publicly viewable blockchain, as explained in the announcement.

“Unfortunately, internal record-keeping among these private entities can vary widely, and this can leave investors and consumers vulnerable to fraud and manipulation,” wrote Beyer, adding:

“This bill is a sensible step to restore some transparency and confidence to the digital asset market.”

According to the bill, crypto service providers will be required to report all off-chain transactions within 24 hours to a CFTC-registered trade repository. The announcement notes that these requirements are similar to the rules for “virtually all securities and swaps transactions.”

U.S. lawmakers have recently been highly focused on cryptocurrency regulations. In mid-September, nine U.S. senators added their support for Senator Elizabeth Warren’s Digital Asset Anti-Money Laundering Act. Reintroduced in July 2023, the legislation, in its current form, aims to combat the illicit use of digital money by cracking down on noncustodial digital wallets and extending Bank Secrecy Act responsibilities, among other legal measures