Decoding the New Crypto Bill
Senior Republicans from the U.S. Congress recently unveiled a draft bill to guide digital tokens from being regarded as securities to commodities. The innovative legislation aims to provide a comprehensive definition of when a digital asset becomes sufficiently decentralized and is no longer treated as an investment contract. The proposal forms part of a larger initiative to bring clearer regulations to digital assets within the country.
Shedding Light on Digital Assets' Status
The draft bill, proposed by House Financial Services Committee Chair Patrick McHenry and House Agriculture Committee Chair Glenn Thompson, aims to further clarify how digital assets align with current U.S. financial law. This includes allowances for the unique attributes of blockchain-based tokens. In a longstanding tug-of-war for crypto projects, the bill seeks to clarify when a token no longer qualifies as an investment contract due to sufficient decentralization.
The Road to Legislation: A Bipartisan Effort
The draft bill is expected to be a significant part of discussions with House Democrats and Senate counterparts. The ultimate goal is to pass a new law this year to regulate the market structure of digital assets in the U.S. However, the reception from policymakers and the Biden administration will significantly impact the legislation's chances of success.
Building Bridges for Crypto Legislation
Committee staff has engaged with several senators active in crypto legislation to facilitate its passage through the House and Senate. These connections include Senate Agriculture Committee Chair Debbie Stabenow, Sen. John Boozman, and Sen. Tim Scott, a newly announced presidential candidate.
Defining Decentralization
The draft bill introduces a definition for a decentralized network, a criterion for a token's transition from being treated as a security to a commodity. If enacted as law, this legislation would require no person to have controlled the network for at least a year prior. Furthermore, an issuer or decentralized organization could own up to 20% of the network's affiliated tokens, and marketing or issuance could only be conducted three months before certification as a decentralized network.
Potential Outcomes and Changes
Should this bill become law, it would pave the way for most token trading platforms to register as alternative trading systems with the SEC. Furthermore, it would exempt payment stablecoins from securities designation. Nonetheless, the bill's language remains subject to further negotiation and change.
