Recently, some draft legislation has captured the attention of cryptocurrency advocates, who are excited about its focus on clarifying the distinction between a security and a commodity. Republican lawmakers in the US House Financial Services Committee and the House Agriculture Committee have collaborated on this discussion draft that aims to regulate digital assets.
The proposed legislation seeks to establish when a digital asset should be regarded as a security and subsequently regulated by the Securities and Exchange Commission (SEC). Additionally, the legislation provides a registration process through which digital assets and intermediaries can be registered with the SEC or the Commodity Futures Trading Commission (CFTC). Coinbase‘s Chief Legal Officer Paul Grewal expressed his optimism on Twitter, stating that the bill could potentially put an end to the long-standing debate between security and commodity classification for digital assets.
In particular, the bill proposes a framework that would grant CFTC jurisdiction over digital commodities and clarify the SEC’s jurisdiction over “digital assets offered as part of an investment contract.” It also outlines a structure for when specific digital assets would become decentralized and, as a result, be treated as commodities under the CFTC. However, the SEC would retain the ability to contest this classification.
Brett Quick, head of the government at the Crypto Council for Innovation, tweeted her encouragement over the proposed legislation. She highlighted that establishing clarity and transparency regarding the classification of digital assets as either securities or commodities is crucial, and defining the roles of the SEC and CFTC is a vital step in achieving this.
Senior policy officials hope to discuss the legislation with Rep. Maxine Waters, D-Calif., a former chair of the House Financial Services Committee. Interestingly, the discussion draft was not shared with Democrats before its announcement last Friday.
Next week, the House Agriculture Committee intends to hold a hearing on digital assets titled “The Future of Digital Assets: Providing Clarity for Digital Asset Spot Markets.” Grewal revealed he would be testifying at this hearing.
In summary, this new draft legislation is generating positive feedback from cryptocurrency supporters as it promises to clarify the ongoing debate between securities and commodities in the digital asset space. Defining the roles of the SEC and CFTC in regulating digital assets is a crucial step forward, ensuring future stability and success for the financial sector.