Crypto exchanges might soon have the opportunity to register with the U.S. Securities and Exchange Commission (SEC), thanks to a new bill proposal from the Republican chairs of two House committees. This move could pave the way for trading digital securities, commodities, and stablecoins all in one place. However, the proposed legislation, though seen as significant for the digital assets sector, comes with caveats, including its lack of Democratic support and the SEC’s ongoing authority to determine which assets fall within its jurisdiction.
Under the legislation, regulated crypto firms can argue that their tokens or cryptocurrencies are commodities, but they must provide proof of decentralization and demonstrate the project is under no one’s control. This explanation would need to account for no single party owning more than 20% of the assets. However, the SEC has the power to challenge this claim.
An SEC-registered crypto exchange, also known as an alternative trading system (ATS), could potentially handle all of a crypto investor’s transactions in one place. This would require the platform to register with the U.S. Commodity Futures Trading Commission (CFTC). For the CFTC, the draft bill introduces a new category of registered business – a digital commodity exchange, where certified crypto commodities would trade. These exchanges would have to comply with the agency’s standard protections and ensure adequate safeguards against market manipulation.
The limitations of the current oversight mean that both the SEC and CFTC have been battling enforcement issues against crypto companies. While this legislation could force SEC Chair Gary Gensler’s hand in updating regulations for crypto-specific oversight, it is only the result of discussions between two Republican chairs and has not accounted for input from their Democratic counterparts. As such, it is merely a starting point for conversations to begin.
Several key features of the proposal include requiring token projects aiming for treatment as commodities to undergo a certification process with the CFTC. The bill also suggests the introduction of a safe harbor for ongoing trading during the development of joint regulations. Other features include enabling broker-dealers to take custody of crypto assets and calling for studies on decentralized finance (DeFi) and non-fungible tokens (NFTs).
However, the legislation is far from perfect, as it lacks necessary appropriations for the SEC and CFTC, potentially resulting in inadequate funding and staffing. The fate of the bill also remains uncertain in the Senate, where crypto-critical Chairman Sherrod Brown has not yet expressed his legislative plans. The bill will become part of a larger negotiation process within the House, the Senate, and in relation to other congressional crypto efforts.
Source: Coindesk
