Members of the Republican House released a bill on June 2 that aims to establish clear roles for regulators in the crypto industry.
SEC’s capabilities
The bill specifically aims to separate the regulation of cryptocurrencies as securities from the regulation of cryptocurrencies as commodities.
The proposed rules would prevent the U.S. Securities and Exchange Commission (SEC) from treating stable payment coins and digital commodities as securities.
The rules would prevent the SEC from denying exemptions to certain trading venues simply because they offer digital assets. “Ancillary activities” such as providing portfolios, publishing software and operating nodes would be exempt from SEC regulation.
In addition, the SEC should amend and modernize the rules on client protection, record-keeping, and digital assets in general.
The rules would nevertheless give the SEC anti-fraud authority over some crypto commodity transactions. Parties that register with the SEC but offer cash and spot markets must register with both the CFTC and the SEC.
CFTC Authority
Conversely, the proposed rules would give the Commodity Futures Trading Commission (CFTC) new authority over digital commodity money and spot markets.
The CFTC would be given authority over payments stablecoins and digital commodities transactions on platforms that register with it. However, the CFTC would not gain control over the design and operation of those stablecoins.
The bill includes requirements for digital commodity exchanges to register with the CFTC, as well as a process for agencies to determine which assets are eligible for trading on registered platforms. It also allows the CFTC to impose requirements on custodians of digital assets, but does not allow the CFTC to directly regulate those custodians.
The proposal would also create a joint advisory agency between the CFTC and the SEC, create other regulatory groups, and conduct initiatives and studies.
Crypto Innovation
Rep. Patrick McHenry, who introduced the bill, said the draft is a “step toward … clear road rules.” He added that the bill aims to strike a balance between “protecting consumers and encouraging responsible innovation”.
The bill represents a joint effort between the House Financial Services Committee, chaired by McHenry himself, and the House Agriculture Committee, chaired by Rep. Glenn Thompson. Representatives French Hill and Dusty Johnson also support the bill.
The bill is relevant to several regulatory debates that have taken place in recent months, including the expansion of exchange rules to non-exchange services, changing custody requirements, and the differing regulatory roles of the CFTC and SEC.
The bill is in its early stages and has not yet received feedback from Democratic lawmakers.
