CRS Reviews Proposed Bill on Regulatory Framework for Digital Assets
Commentary by Steven Lofchie
The Congressional Research Service ("CRS") reviewed proposed legislation, H.R. 4763 ("Financial Innovation and Technology for the 21st Century Act"), that would change the way digital assets are regulated (see related coverage).
CRS explained that under the Act, if a digital asset runs on a decentralized blockchain, the CFTC would be the designated regulator. CRS said that by classifying certain digital assets as commodities, the Act might address the "perceived digital asset regulatory gap" by (i) providing the CFTC exclusive jurisdiction over cash or spot market digital commodities and (ii) requiring entities trading digital commodities to register with the CFTC.
CRS explained that digital assets that qualify as securities would be exempt from existing regulations if they comply with the Act's (i) restrictions on transaction amounts, including non-accredited investor access caps and purchaser limits, and (ii) issuer disclosures.
Commentary
The SEC's failure for these many years to give any consideration to the development of a workable regulatory scheme for digital assets puts Congress in a bind. The Ripple case created further uncertainty as to whether the SEC even has jurisdiction over many digital assets. Now there is real pressure on Congress to adopt a digital asset framework, but the legislators must do so without the regulatory groundwork that should have been provided by the SEC.
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House Financial Services Subcommittee Chair French Hill (R-AR), House Agriculture Committee Chair Glen "GT" Thompson (R-PA) and House Agriculture Subcommittee Chair Dusty Johnson (R-SD) introduced legislation to authorize the SEC and the CFTC to establish a registration framework for digital assets and support further research on emerging technologies.