Lawmakers Unite to Advance Digital Asset Regulation
In an unusual display of bipartisan cooperation, a coalition of legislators from both major political parties in the House of Representatives has put forward a proposal aimed at establishing clearer regulations for the digital asset market. The initiative, named the Digital Asset Market Clarity Act, is spearheaded by French Hill (R-Ariz.), the chair of the House Financial Services Committee. Among the co-sponsors are G.T. Thompson (R-Penn.) and Angie Craig (D-Minn.), who lead the Agriculture Committee.
Key Provisions of the Bill
The proposed legislation seeks to redefine digital commodities sold through investment contracts by exempting them from being classified as investment contracts themselves. This change would enable issuers to develop digital assets using blockchain smart contracts without the assets needing to adhere to the investment contract regulations, provided that the sale contract does comply with those rules. Additionally, the bill proposes to exempt the sale of investment contracts related to digital commodities from conventional security registration requirements, subject to specific conditions.
Regulatory Framework Adjustments
Issuers will be mandated to confirm with the Securities and Exchange Commission (SEC) that any blockchain system used in their sales offer meets maturity standards. The legislation instructs the SEC to establish regulations that outline the criteria for a blockchain to be considered mature. It also permits SEC-regulated brokers, dealers, and exchanges to employ blockchain technology for their record-keeping obligations. Importantly, the bill designates the SEC as the regulatory body overseeing digital commodities activities conducted by SEC-registered broker-dealers and exchanges that are exempt from registration with the Commodity Futures Trading Commission (CFTC).
Creation of New Regulatory Entities
Another aspect of the proposal involves the establishment of new entities registered with the CFTC, including Digital Commodity Exchanges, Digital Commodity Dealers, and Digital Commodity Brokers. The CFTC would gain exclusive authority over cash or spot markets involving these entities. Collectively, these provisions aim to clarify the regulatory boundaries between two key agencies, which have previously hindered the formulation of straightforward rules for crypto investors and issuers.
Additional Considerations in the Legislation
The bill also encompasses regulations concerning the registration and operation of alternative trading systems (ATSs) that primarily engage with digital commodities and approved stablecoins. It addresses custodial regulations for digital assets, the registration and oversight of digital commodities brokers and exchanges, and how traditional financial institutions should treat digital assets.
Challenges Faced by the Bill
The journey of this legislation has not been smooth. A planned joint committee hearing between the Financial Services and Agriculture committees earlier this May descended into disorder when some Democrats, who had previously supported the bill, suddenly raised objections in light of media reports concerning President Trump and his family’s crypto dealings. This led to several committee members exiting the hearing, forcing the session to be quickly reclassified as a roundtable to accommodate witness testimonies.
Statements from Key Advocates
In his remarks introducing the bill, Financial Services Chair Hill emphasized that the legislation delivers much-needed clarity to the digital asset landscape, prioritizes consumer protection, fosters American innovation, and builds on previous efforts in the 118th Congress. “I am eager to advance our bill to President Trump for his signature, solidifying America’s role as a leader in the digital asset arena,” he stated. Meanwhile, Agriculture Committee ranking member Craig noted, “Digital assets, including cryptocurrencies, are transitioning from being unique financial products to becoming increasingly integrated into our existing financial framework. It is essential for Congress to implement clear protections for consumers and retail investors, along with comprehensive guidelines for businesses operating in the digital asset space.”
