The Congress records confirm the introduction of a draft bill by senior House Republicans to deliver a clear pathway for digital tokens to assume commodity status.
The bill seeks to deliver a clear framework illustrating when the project becomes sufficient decentralization for the tokens to qualify for treatment for investment contracts.
Bill Proposing Procedural Clarity Introduced by House Republicans
The draft bill seeks procedural clarity on when the digital token changes status from security to the commodity to offer flexibility and better guidance for digital assets within the US.
The debate draft, as illustrated by Glenn Thompson, who chairs the Agriculture Committee, echoed sentiments conveyed by Patrick McHenry, who heads the Financial Services Committee. The two lawmakers termed the Congress efforts as illuminating the path towards how digital assets would perfectly fit within the existing financial law.
The two chairs admitted that the proposal would accommodate the unique features of blockchain-based tokens.
The bill targets delivering a definite procedure detailing when projects with sufficient decentralization cease becoming investment contracts. Its approval will end the long-standing tension pitting the Commodities Futures Trade Commission (CFTC) against the Securities and Exchange Commission (SEC).
Bill Offers Template to Aid Negotiations with Democrats and Senate
McHenry and Thompson aim for the draft to serve as the template to aid ongoing negotiations that involve House Democrats and Senate lawmakers. The committee staff privy to the legislation efforts seeks the bill to fuel the talks. As such, the committees are optimistic about US lawmakers delivering two new laws to govern the digital assets market structure. The two chairs indicate that the proposal refrains from becoming a take-it-or-leave-it version.
The committee members are uncertain about the reception it will attract from policymakers aligned with President Biden’s administration. Their reception will influence the likelihood of the legislation passing. The committee members are banking on the devotion of Treasury Secretary Janet Yellen, who welcomed the initiative to enact new laws.
The committee staff admitted to contacting senators’ offices actively involved in the crypto legislation to streamline its passage within the House and Congress. The committee members confirmed extending the outreach to Agriculture chair Debbie Stabenow alongside Senators John Boozman and Tim Scott, who chairs the Banking Committee.
Recently, Senator Lummis confessed to supporting the McHenry and Thompson-led efforts. The Senator from Wyoming unanimously agreed with Senator Kirsten Gillibrand to pause the bill’s reintroduction to give the Republican bill sufficient time for debate.
Criticism of Regulation Through Enforcement
The bill coincides with a period when several players within the digital asset industry criticize the move by US regulators to enforce securities laws originally meant for stocks and bonds investments. The loudest calls allege that the regulators should refrain from relying upon securities laws formulated from a centralized basis.
The critics of regulation through enforcement are lobbying for the securities laws to embrace decentralized capital generation. Their position is becoming a primary point of contention. Rampant fraud within the crypto space constitutes the basis for the Securities and Exchange Commission (SEC) to crack down on several firms.
Decentralized Network Framework Defined with Stablecoins Regulation Underway
The proposed legislation seeks to deliver a more stable and investor-friendly structure and climate for digital assets. Also, the proponents argued that the current nature of securities laws is too rigid to apply to crypto projects.
The bill clearly defines a decentralized network in a framework detailing how token transitions from security to commodity. The bill’s proponents consider the commodity an investment category demanding lower disclosure requirements.
The language utilized within the current bill’s version considers a decentralized network as one where no individual exercises control for one year before. Also, the bill outlines that no issuer or decentralized entity should exercise over 20% ownership rights to the native tokens.
The bill considers a decentralized network where no marketing and issuance occurred 90 days before its certification. Lastly, the bill outlines that token issuance within a year should strictly be to the end users.
The bill’s text allows the private selling of tokens to generate funds before the project’s reclassification as a decentralized network. The bill would permit the private sales that already concluded within the framework as privately-held security offerings.
The bill identifies SEC and CFTC as the market regulators responsible for ascertaining the project’s qualification as decentralized. It tasks SEC with the responsibility to eliminate the decentralized classification whenever the project becomes concentrated.
The bill’s approval into law would obligate trading platforms for the tokens to embrace the SEC’s procedural registration path as alternative trading systems. The bill exempts payment stablecoins from the securities classification. In particular, Representative French Hill is teaming up with McHenry to formulate a comprehensive framework for the stablecoin digital assets.
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