U.S. Reps. Patrick McHenry and Glenn Thompson, chairmen of the House Financial Services Committee and the House Committee on Agriculture, respectively, recently released a draft bill aiming to improve regulation of the digital asset industry.
McHenry (R-NC) said he hoped the joint effort between the committees had led to a draft that takes a balanced approach. “This discussion draft is the first step toward delivering on Republicans’ commitment to develop clear rules of the road for the digital asset ecosystem,” he said, in a release by Financial Services Committee Republicans. “Our goal is to strike the appropriate balance between consumer protection and encouraging responsible innovation."
The 162-page "discussion draft" released on June 1 includes amendments to the Securities Act of 1933 and the Commodity Exchange Act, which would add terms like "blockchain," "source code," "digital commodity custodian" and "digital asset issuer."
"This is the product of an unprecedented joint effort between the House Financial Services and Agriculture committees, which gives us a better shot at striking that balance," McHenry said. "I encourage stakeholders and market participants to provide constructive feedback to help us improve our legislation.”
The draft also includes provisional requirements for digital exchanges, brokers and dealers to register with the Commodity Futures Trading Commission (CFTC) and for "alternative traders" to register with the Securities and Exchange Commission (SEC).
"For months our committees have worked collaboratively to establish a viable regulatory framework for digital assets necessary to protect consumers and promote American innovation," Thompson (R-PA) said in the release. "(This) release of the discussion draft brings us one step closer to bringing regulatory certainty to these novel and emerging technologies. This historic joint effort with the House Committee on Financial Services aims to close authority gaps between the CFTC and SEC and bolster U.S. leadership in financial and technological innovation.”
The bill suggests reporting requirements for digital asset issuers on the risks related to the asset, as well as a process for certifying that a blockchain is decentralized, according to a summary of the bill.
Stablecoins and digital commodities would be excluded from the definition of securities, but the SEC will have authority over stablecoin transactions for anti-fraud enforcement purposes. However, the SEC would have no authority over the "design, structure or operation of payment stablecoins."
“There is a lot of confusion surrounding digital assets," Rep. Dusty Johnson (R-SD) said in the committee's release. "Our bill establishes a functional framework to fill the gaps in the regulatory process between the CFTC and the SEC. Johnson is also chairman of the Subcommittee on Commodity Markets, Digital Assets and Rural Development.
"This is not only beneficial for digital asset firms, but for consumers and digital asset owners," he said. "I’m grateful for the teamwork of the Ag and Financial Services Committee on this bill and to ensure America remains the leader in financial and technological innovation.”
Changpeng "CZ" Zhao, the Canadian CEO and founder of Binance, the largest crypto exchange in the world, also has called for clearer regulations, writing, “Regulatory clarity is needed ASAP" in a tweet on Jan. 24. "I have said this before and will say it again: The best form of user protection is globally consistent, risk-based regulation....User protection and market integrity are enhanced when lawmakers and regulators expand the scope of permissible activities. We have seen this in many other industries: tradfi, health care, pharma, internet, content, etc."
Earlier this week, the SEC filed lawsuits against crypto firms Binance and Coinbase, according to the SEC website. These lawsuits allege that Coinbase should have registered as an exchange with the SEC and accuse Binance of offering unregistered securities and permitting U.S. customers to use the global Binance platform, rather than restricting them to its U.S.-based platform.
