Republicans in the U.S. House of Representatives today introduced a new digital asset oversight bill aimed at establishing a regulatory framework to protect investors in the cryptocurrency space.
Many traditional securities have been removed from the digital asset category, raising concerns about the negative impact on decentralized finance (DeFi).
Enabling SEC registration for cryptocurrency exchanges
“Today’s submission of the 21st Century Financial Innovation and Technology Act marks a significant milestone in the House Agriculture and Financial Services Committee’s efforts to establish a long-awaited regulatory framework that protects consumers and investors and fosters America’s leadership in digital assets,” said Glenn “GT” Thompson, chairman of the House Committee on Agriculture.
The bill is one of several bills submitted in recent years aimed at enacting comprehensive rules for digital assets. The filing comes amid a perceived lack of regulatory clarity and a flurry of aggressive enforcement actions, with existing cryptocurrency businesses considering exiting the U.S. and preventing startups from forming.
The bill was first drafted in early June. It aims to set the regulatory pathway for crypto exchanges to register with the U.S. Securities and Exchange Commission (SEC), allowing crypto exchanges to trade digital securities, commodities and stablecoins all in one place.
“The cryptocurrency industry needs clarity, and our joint bill can give status to both the Commodity Futures Trading Commission (CFTC) and the SEC. Our bill establishes clear principles to ensure financial safety and certainty as digital asset developers continue to innovate,” said Rep. Dusty Johnson.
Defining digital assets matters
Gabriel Shapiro, general counsel at Delphi Labs, said the changes from June’s draft, in his view, would “completely change the value of the bill” and reintroduce the ambiguity they were trying to resolve.
On page 10 of the bill, the definition of “digital assets” excludes various traditional securities such as stocks, bonds, “transferable shares” and “certificates of participation in profit or profit-sharing agreements.”
In this regard, Shapiro said on Twitter that various assets found in decentralized finance markets, such as Compound’s c-token and Liquid Collective’s Liquid Staking Token, “will be highly regulated under this provision, if not under current law.” “The SEC could still go down the road of war…just claim that tokens are ‘transferable stocks’ or ‘profit interests’ or whatever,” he warned.
The SEC can still go on the warpath…all they have to do is argue that a token is a “transferable share” “a profit interest” etc.
XRP and such will be fine but DeFi can still be persecuted at will… actually the regulators will have expanded authority to do so…
— _gabriel Shapir0 (@lex_node) July 20, 2023
｜Editing: Rinan Hayashi
｜Original: US House Republicans Introduce Crypto Oversight Bill With Changes From June Draft