Republican lawmakers in the US House Financial Services Committee and the House Agriculture Committee have come together to draft legislation aimed at regulating digital assets. The legislation, called the Digital Asset Market Structure Discussion Draft, seeks to clarify when a digital asset would be considered a security and therefore regulated by the Securities and Exchange Commission (SEC). It also creates a framework for how digital assets are treated and how intermediaries can register with the SEC or Commodity Futures Trading Commission (CFTC).
The Draft Legislation
The Digital Asset Market Structure Discussion Draft, created by House Financial Services Chair Patrick T. McHenry of North Carolina and House Agriculture Chair Glenn “GT” Thompson of Pennsylvania, would give the CFTC jurisdiction over digital commodities, while clarifying the SEC’s jurisdiction over “digital assets offered as part of an investment contract.” The legislation requires the SEC and CFTC to work together on rulemakings regarding certain terms and the oversight of dually registered exchanges.
The legislation also creates a framework for when certain digital assets would become decentralized and therefore a commodity under the CFTC, and no longer be under the SEC’s jurisdiction. However, the SEC can object and provide a detailed analysis. A new joint CFTC-SEC Advisory Committee on Digital Assets could also be created, under the Act, which would provide advice to the SEC and CFTC on digital assets and require a joint study on decentralized finance.
According to senior policy officials familiar with drafting the legislation, lawmakers wanted to find common ground as they have and plan to introduce their own bills to regulate cryptocurrency. They were also hopeful to talk with Rep. Maxine Waters, D-Calif., who used to chair House Financial Services on the legislation.
The officials said the discussion draft was not shared ahead of the announcement on Friday with Democrats. The House Agriculture Committee plans to hold a hearing next week on digital assets called the “The Future of Digital Assets: Providing Clarity for Digital Asset Spot Markets.”
The Digital Asset Market Structure Discussion Draft is aimed at providing clarity by creating a framework for the regulation of digital assets. The legislation clarifies when digital assets would be considered a security and regulated by the SEC. It also gives the CFTC jurisdiction over digital commodities and creates a framework for when certain digital assets would become decentralized. The draft legislation could lead to the creation of a new joint CFTC-SEC Advisory Committee on Digital Assets, which would provide advice to the SEC and CFTC on digital assets and require a joint study on decentralized finance. The House Agriculture Committee plans to hold a hearing on digital assets next week.