House introduces new effort to regulate cryptocurrency
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Key members of House leadership, as well as three Democrats, introduced new legislation Thursday to clarify the lanes of responsibility for regulatory oversight of digital assets.
Why it matters: While the cryptocurrency business is often described as a Wild West, longtime practitioners argue that the only reason they haven't been following rules is because the U.S. hasn't written rules for them to follow.
- "This bill is a bold step to ensuring that the next iteration of the internet is developed by Americans and driven by our values," House Majority Whip Tom Emmer (R.-Minn.), one of the co-sponsors at introduction, said in a statement.
The Digital Asset Market Clarity Act, a so-called market structure bill, provides for clear delineation of responsibility between the CFTC and the SEC, according to a one-pager from the bill's authors.
- Digital asset issuers can register to use tokens to raise money for new ventures under SEC supervision.
- Trading venues for most secondary sales of digital assets would be supervised by the CFTC.
- Overall, the bill provides an extension of the disclosure-based regime that has been used for other markets, but directs agencies to update it with regard to this new category of asset.
Zoom in: The legislation specifically requires dealers and brokers to segregate customer funds from their own and disclose conflicts of interest.
- Issues such as those were at the heart of what unwound the bankrupt exchange FTX in 2022.
Between the lines: Section 203 of the draft legislation effectively codifies the decision in the SEC vs. Ripple case, where the court ruled that transactions on a secondary market were not necessarily securities, even if the initial sale was.
What they're saying: "These bipartisan co-sponsors have been some of the fiercest crypto leaders in Congress, and their bill takes an important step towards establishing a common-sense regulatory framework for digital assets in the U.S.," Meghan Pennington, a spokesperson for the industry group Stand with Crypto, said in a statement.
- "We urge congressional leaders to prioritize swift action on this legislation to solidify America's global leadership in the blockchain economy."
Flashback: In the last Congress, the House sent a version of this legislation to the Senate, but the higher chamber never picked it up.
- Leaders of the Financial Services Committee and Agriculture (which oversee the SEC and CFTC respectively) released a discussion draft of legislation in May.
What's next: Hearings.
