In a move signaling a more structured approach to the nascent crypto industry, House Republicans on Thursday unveiled a new legislative proposal that creates swim lanes between the Commodity Futures Trading Commission and the US Securities and Exchange Commission (SEC).
At 212 pages, the “Financial Innovation and Technology for the 21st Century Act” is designed to provide a clear regulatory landscape for digital assets, introduce new definitions, highlight exemptions for digital assets, and chart a course for intermediaries in the space for digital assets (e.g., crypto exchanges) to begin registering with the CFTC and SEC.
To that end, the new bill establishes a joint regulatory authority between the two regulators, giving the CFTC the authority to monitor and oversee the digital commodities market, including exchanges and broker-dealers.
The bill in detail
In terms of SEC authority, the bill proposes amendments to existing US securities laws that would require the SEC to consider “innovation” when formulating new regulations. In other words, digital commodities such as Bitcoin and certain stablecoins used for payments would be exempt from classification as “securities.”
The bill also outlines the SEC’s jurisdiction over payment stablecoins, particularly when used on platforms registered with the SEC. However, it stops granting regulatory oversight over the design, structure or operational aspects of these stablecoins.
Companies seeking to register as broker-dealer or alternative trading systems with the SEC, particularly to function as a digital asset intermediary, would be subject to rigorous regulatory scrutiny.
Rep. Glenn “GT” Thompson (R-Pa.), chairman of the House Committee on Agriculture, stressed the importance of the bill in a recent statement.
“Over the past few months, our teams have solicited extensive feedback from stakeholders and market participants and have worked diligently to produce a legislative product that aims to close existing gaps in authority and thereby strengthen U.S. leadership in the field of financial and technological innovation,” Thompson said Thursday.
Dusty Johnson (RS.D.) also expressed the industry’s desire for a clear regulatory stance. “The crypto industry wants clarity, and our cooperation bill puts both the CFTC and SEC at the table. Our bill establishes clear principles to ensure financial security and certainty as blockchain technology continues to innovate.
The move comes amid growing concerns within the crypto community over perceived regulatory ambiguity in the US. from the US In addition, this unclear regulation has also discouraged potential startups from establishing themselves in the country.
Criticism and concerns
The bill has not been without its critics. Gabriel Shapiro, Chief Legal Officer at Delphi Labs, pointed out a major change from the June bill via Twitter. He noted that the updated version of the bill has excluded a variety of conventional securities, such as stocks and bonds, from the definition of “digital assets.” This also includes “transferable shares” and “equity shares” in profit-sharing agreements.
Shapiro expressed concern about the implications of this change, particularly for the decentralized finance (DeFi) industry. He said certain assets prevalent in the DeFi space, such as Compound’s cTokens or Liquid Collective’s Liquid Staking Tokens, may face strict regulations under the new provisions, even if they were previously not subject to such regulations.
As the crypto community awaits further developments, it is clear that the proposed bill has sparked renewed debate about the balance between innovation and regulation in the digital asset sector. The coming months will be critical in determining whether this bill addresses the most fundamental questions that have rightfully left American investors and industry participants frustrated and agitated.
Editor’s Note: This article was written by an nft now contributor in collaboration with OpenAI’s GPT-4.