Twilight debate scene, Art Deco style, lawmakers discussing digital assets, contrasting colors symbolizing conflicting viewpoints, subtle glow around advocates of change, contemplative mood, chiaroscuro lighting emphasizing ongoing uncertainty, Ethereum & Bitcoin tokens floating in the air.

On May 10, the United States House of Representatives Financial Services Committee and Agriculture Committee held a joint hearing on digital asset regulation, reflecting the ongoing conflict between lawmakers on how to handle cryptocurrencies. Some, like Representative French Hill, a Republican from Arkansas, call for applying the principle of ‘same risk, same regulation’ to amend current laws. In contrast, others, like Representative Stephen Lynch, a Democrat from Massachusetts, consider the existing regulation sufficient and claim that further legislation is unnecessary and redundant.

Witnesses during the hearing, such as Andrew Durgee, head of Web3 investment platform Republic Crypto, advocated for change, highlighting the perceived incompatibility between current regulations and decentralized blockchain trading technology. Durgee proposed legal definitions in future amendments addressing smart contracts, deployers, liquidity providers, and front-end website operators.

Matthew Kulkin, former director of the CFTC Division of Swap Dealer and Intermediary Oversight, suggested that most large digital assets should be regulated by the CFTC, since they are commodities. Kraken chief legal officer Marco Santori recommended establishing a functional framework, defining the SEC’s jurisdiction, and expanding the CFTC’s authority to regulate digital asset markets and exchanges. Daniel Schoenberger from the Web3 Foundation echoed Santori’s sentiments, cautioning against hastily applying laws not explicitly designed for blockchain technology to the digital asset space.

On the other hand, Timothy Massad, a research fellow from Harvard Kennedy School, argued that current investor protection principles are applicable regardless of whether a token is a security or commodity. Massad emphasized that all trading or lending platforms trading Bitcoin or Ethereum must comply with core principles for all tokens on that platform, even if not registered with the SEC or CFTC as intermediaries.

Despite the industry welcoming the hearing, the polarized views of lawmakers make it difficult to predict any major legislative changes. Various legislative projects are waiting to be heard by Congress, such as the Lummis-Gillibrand “crypto bill,” yet the Democrats’ strong support for the SEC hints at the challenges of implementing drastic shifts in regulation. The current political stalemate appears unlikely to break down soon, and market volatility makes it difficult to envision digital asset firms enjoying freedom from regulation.

Source: Cointelegraph

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