Regulation
House to vote on who will regulate crypto
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The House of Representatives is considering adopting a Invoice tomorrow, this would divide responsibility for regulating cryptocurrencies between the Securities and Exchange Commission and the Commodities Futures Trading Commission, depending on the degree of centralized control of the associated blockchains.
The Financial Innovation and Technology for the 21st Century Act, known as FIT21, would give the SEC power over cryptos that remain tightly controlled by their developers or small groups of owners. More broadly decentralized tokens, which would include bitcoin and possibly ether, will be placed under the CFTC, which is more geared toward sophisticated institutional investors than the SEC, which aims to protect retail investors.
If the bill becomes law, it would end a turf war between the two agencies and give the judicial system a specific framework to adjudicate regulatory disputes regarding crypto for the first time.
Advancement by the House Financial Services Committee in July, the legislation also look for increasing transparency and accountability of crypto exchanges, brokers and dealers and providing blockchain developers with a compliant way to raise funds.
The CFTC would regulate a cryptocurrency as a commodity “if the blockchain, or digital ledger, on which it operates is functional and decentralized,” according to the Congressional Research Service. Conversely, the SEC would regulate a digital asset as a security “if its associated blockchain is functional but not decentralized.” The bill classifies a blockchain as decentralized if, “among other requirements, no individual has unilateral authority to control the blockchain or its use, and no issuer or affiliated person controls 20% or more of the digital asset or of his right to vote.
However, the distinction would also depend on the status of the holder (e.g., an issuer or unaffiliated third party) and how the digital asset is acquired (e.g., as part of a primary capital raising offering, of a drop or transaction). on a platform regulated by the CFTC).
“FIT21 is perhaps the most significant digital assets legislation in Congressional history. In my view, the best way to drive continued investment and innovation in financial services and beyond is to enact it into law,” says Rep. French Hill (R-Ark.) – who chairs the sub -committee on digital assets. The hill is a potential successor to House Financial Services Committee Chairman Patrick McHenry (R-N.C.), who plans to retire at the end of this term.
The bill garnered support from former President Donald Trump and several of his advisers, according to Hill. “They think it’s an important part of America’s innovative leadership in the world,” he said.
Sixty digital asset organizations and companies, including crypto exchanges Coinbase and Kraken and venture capital firm Andreessen Horowitz, also expressed their support. “While FIT21 is not a perfect bill (no bill is!), it is a critical and historic step toward establishing a federal regulatory framework for digital assets in the United States,” Sheila Warren, CEO of the Crypto Council for Innovation, said in her comments. shared with Forbes.
Although FIT21 is likely to pass the House, its prospects in the Senate remain uncertain. However, Rep. McHenry would have suggested last week that the level of Democratic support in the House vote could significantly influence the Senate’s decision.
“This bill very well reflects many Democratic priorities in the House Financial Services Committee. So I think you’ll find support on both sides for a digital asset market structure bill. And with the end-of-year measures, the reauthorization of the Farm Bill, there are a number of legislative alternatives other than just passing the bill through the House and Senate,” Hill adds.
The expected House vote comes just six days after the U.S. Senate. reversed an SEC crypto accounting policy, Staff Accounting Bulletin (SAB) 121, which requires companies holding clients’ cryptocurrencies to record them on their balance sheets. This mandate could have significant capital implications for banks and financial institutions working with crypto clients. President Joe Biden has said he would veto this effort.