It is somewhat ironic but not surprising that Congress is getting serious about the regulation of the crypto industry just as the most egregious excesses and leveraged players are starting to unwind on their own.

Recently, Senators Lummis of Wyoming and Senator Gillibrand of New York introduced legislation to create a regulatory framework for the crypto markets. The bill would treat digital assets like commodities which would put it under the purview of the Commodity Futures Trading Commission (CFTC) to regulate most of the industry.

Recent developments in cryptocurrencies which include bitcoin falling below $20,000 and numerous blowups in the space have highlighted the importance and need for regulation in the space given the heavy losses sustained by many investors and that many are unable to access their funds at various brokerages.

In fact, many of the most prominent players in the space like Microstrategy's (MSTR  ) are openly calling for the U.S. government to issue its own stablecoin, while others are calling for more regulation.

This is also ironic, because the founding principle of bitcoin and crypto was about escaping the Fed and onerous financial regulations. This has turned out to be false, just like bitcoin's initial promise to protect purchasing power of investors. It's also true that most crypto investors and traders were not amenable to government regulation or intervention, while the bull market was raging. There's also considerable debate about how regulations will work given that cryptos are a global, friction-less asset.

The Responsible Financial Innovation Act seeks to help grow the cryptocurrency industry and allow for innovations, while providing consumer protections and transparency. It would treat all digital assets like commodities and give the CFTC oversight.

Some critics believe that the CFTC is unequipped to handle this task given the complexity and resources required in addition to the fast-moving nature of the industry. Others see it as a better fit given that the CFTC has been pretty effective in handling oversight of crypto markets.

However, some aspects of the crypto industry related to capital issuance would continue to fall under the SEC. There's also a question about how certain crypto assets like DAOs would be regulated given that they have characteristics of 'digital assets' and are also involved in the capital issuance process.