Draft for clarification of virtual currency regulations
Republican officials in the U.S. House of Representatives released a draft law on the regulation of crypto assets (virtual currency) on the 2nd. It is a long-awaited bill in the United States that aims to clarify cryptocurrency regulations.
The draft was drafted by Financial Services Commission Chairman Patrick McHenry and Agriculture Commission Chairman Glenn Thompson.
McHenry said the draft was “a first step toward bringing much-needed regulatory clarity to the digital asset ecosystem.” He called for constructive feedback on the draft. At the beginning of the draft, its significance is explained as follows.
The current regulatory framework for digital assets stifles innovation and fails to provide adequate consumer protection. The House Financial Services and Agriculture Committees seek to remedy these shortcomings by establishing a framework that works well for both market participants and consumers.
The proposed framework would provide clear regulation for cryptocurrency companies and bridge the gap that exists between the authorities of the U.S. Commodity Futures Trading Commission (CFTC) and the U.S. Securities and Exchange Commission (SEC). will also be
Clarifying the line between “securities” and “commodities”
Among other things, the draft seeks to clarify the line between when a given cryptocurrency token is considered a security and when it is considered a commodity. It gives a clear definition of when a token project is sufficiently decentralized to be no longer an investment contract.
Specifically, it prescribed a certification process for a cryptocurrency issuer to demonstrate to the SEC that its cryptocurrency network is decentralized.
This is subject to change, but according to the current draft, a “decentralized” network is defined as one in which no one has been in control for at least the past year and no token issuer or organization has Defined as a network that does not own more than 20% of its tokens.
Another condition is that the project has not been marketed or issued tokens for three months before being certified as a decentralized network. If a token has been issued within 12 months, it must have been issued only to an end user.
The SEC can challenge the certification under the law, but it must elaborate on why. Also, if a project changes from decentralized to centralized, the SEC can revoke its designation as decentralized.
Additionally, according to the draft, the cryptocurrency trading platform will be able to register as a business as an Alternative Trading System (ATS). It also prohibits the SEC from refusing to allow a platform to operate as an ATS because it handles cryptocurrencies.
Payment stablecoins are exempt from securities designation, and Congressman McHenry and others are preparing a separate bill to address such stablecoins.
connection: US House holds public hearing on stablecoin draft
Requires SEC and CFTC to work together
The draft also specifies that the SEC and CFTC will work together on cryptocurrencies. It includes the establishment of a joint CFTC-SEC advisory committee on digital assets.
The committee will consist of 20 market participants and will advise both committees on digital assets.
There is also a clause that requires the CFTC and SEC to conduct joint research on decentralized finance (DeFi). It also proposed that the two commissions develop a new framework for comprehensive regulation of the cryptocurrency market, giving businesses a transitional period to comply with the law.
CFTC (Commodity Futures Trading Commission)
An organization that supervises the futures trading market in the United States, including commodities listed on commodity exchanges, interest rates, and derivatives in general.