Republican Lawmakers Propose Draft Legislation to Regulate Digital Assets Law

Digital Assets Law: In a joint effort, Republican lawmakers from the US House Financial Services Committee and the House Agriculture Committee have unveiled a discussion draft aimed at regulating digital assets. The legislation, which was released on Friday, seeks to provide clarity on the classification of digital assets as securities, thereby determining their regulation by the Securities and Exchange Commission (SEC). Additionally, the draft outlines a process for the treatment of digital assets and the registration of intermediaries with the SEC or the Commodity Futures Trading Commission (CFTC).

Source: Screenshot of YouTube video on Rep. McHenry’s page

According to sources familiar with the development of the legislation, House Financial Services Chair Patrick T. McHenry of North Carolina and House Agriculture Chair Glenn “GT” Thompson of Pennsylvania expressed a desire to collaborate on finding a way forward during the previous Congress.

The proposed legislation, known as the Digital Asset Market Structure Discussion Draft, aims to establish a framework that grants the CFTC jurisdiction over digital commodities while defining the SEC’s jurisdiction over “digital assets offered as part of an investment contract.” By doing so, the draft legislation seeks to streamline the regulatory process surrounding digital assets.

Under the provisions of the draft, the SEC and the CFTC would be required to collaborate on rulemakings pertaining to specific terms and the oversight of exchanges that are dually registered. The legislation also outlines a framework to determine when certain digital assets transition from centralized to decentralized, thereby falling under the purview of the CFTC and no longer regulated by the SEC. However, the SEC retains the right to object to such transitions and provide a detailed analysis.

To facilitate informed decision-making, the draft legislation proposes the establishment of a new joint advisory committee, named the CFTC-SEC Advisory Committee on Digital Assets. This committee would provide advice to both the SEC and the CFTC on matters relating to digital assets and would conduct a joint study on decentralized finance.

The legislators involved in this effort aim to find common ground, recognizing that various lawmakers have already introduced or plan to introduce their own bills to regulate cryptocurrencies. Additionally, they expressed a willingness to engage in discussions with Representative Maxine Waters, a Democrat from California who previously chaired the House Financial Services Committee.

It is worth noting that the discussion draft was not shared with Democrats ahead of the official announcement on Friday. However, the House Agriculture Committee has scheduled a hearing for the following week, titled “The Future of Digital Assets: Providing Clarity for Digital Asset Spot Markets.”

In conclusion, the Republican lawmakers’ discussion draft seeks to establish a regulatory framework for digital assets in the United States. By clarifying the classification of digital assets and defining the responsibilities of the SEC and the CFTC, the legislation aims to create a more structured and secure environment for digital asset markets.

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