On June 2, Republican House members released a draft bill that aims to establish clear roles for regulators in the cryptocurrency industry. The bill is designed to separate the regulation of cryptocurrencies as securities from the regulation of cryptocurrencies as commodities.
The Proposed Rules
The bill proposes that the U.S. Securities and Exchange Commission (SEC) should not treat payment stablecoins and digital commodities as securities. Additionally, the bill would prevent the SEC from denying exemptions to certain trading platforms simply because they offer digital assets. The bill would exempt “ancillary activities” such as wallet provision, software publishing, and node operation from SEC regulation. However, the SEC would retain anti-fraud authority over some transactions involving crypto commodities.
Under the proposed rules, parties that register with the SEC but offer cash and spot markets would be required to register with both the SEC and the Commodity Futures Trading Commission (CFTC). Meanwhile, the CFTC would gain new authority over digital commodity cash and spot markets. The CFTC would have authority over transactions involving payment stablecoins and digital commodities on platforms that register with it. However, the CFTC would not have control over the design and operation of those stablecoins.
The bill sets out requirements for digital commodity exchanges that register with the CFTC and establishes a process by which services can determine what assets are eligible for trading on registered platforms. The bill also allows the CFTC to set requirements for digital asset custodians but does not let the CFTC directly regulate those custodians.
The bill proposes the establishment of a joint advisory between the CFTC and SEC, as well as other regulatory groups, initiatives, and studies.
Rep. Patrick McHenry, who advanced the bill, said the draft is a “step toward clear rules of the road.” He added that the bill aims to find a balance between “consumer protection and encouraging responsible innovation.”
The bill is a joint effort between the House Financial Services Committee, chaired by McHenry, and the House Agriculture Committee, chaired by Rep. Glenn Thompson. Reps. French Hill and Dusty Johnson also support the bill.
The bill addresses several regulatory debates that have taken place in recent months, including the expansion of exchange rules to non-exchange services, changing custodianship requirements, and the CFTC and SEC’s differing regulatory roles.
The bill is still in its early stages and has not yet received feedback from Democrat lawmakers. Nonetheless, the proposed bill is an attempt to provide clarity and establish a regulatory framework for the cryptocurrency industry. The bill sets out to balance the need for consumer protection with the encouragement of responsible innovation.