U.S. House Republicans Introduce Crypto Oversight Bill With Changes From June Draft

The revised bill excludes a host of traditional securities from the "digital asset" category, which some say bodes ill for DeFi.

AccessTimeIconJul 20, 2023 at 9:55 p.m. UTC
Updated Jul 21, 2023 at 5:03 a.m. UTC

U.S. House Republicans introduced a new digital assets oversight bill on Thursday that aims to establish a regulatory framework to protect investors in the crypto sector.

“Today's introduction of the Financial Innovation and Technology for the 21st Century Act marks a significant milestone in the House Committees on Agriculture and Financial Services efforts to establish a much-needed regulatory framework that protects consumers and investors and fosters American leadership in the digital asset space,” said Chairman of the House Committee on Agriculture Rep. Glenn “GT” Thompson (R-Pa.) in a statement.

The bill, one of several introduced in recent years that aim to create comprehensive rules for digital assets, comes at a time when a perceived lack of regulatory clarity and a wave of aggressive enforcement actions are spurring established crypto businesses to consider leaving the U.S., and deterring startups from forming there.

Thursday's bill, first drafted in early June, aims to lay down a regulatory path for crypto exchanges to register with the U.S. Securities and Exchange Commission (SEC), and would enable them to trade digital securities, commodities and stablecoins all in one place.

“The crypto industry wants clarity and our collaborative bill gives both the CFTC and SEC a seat at the table. Our bill establishes clear principles to ensure financial security and certainty as digital asset developers continue to innovate,” said Dusty Johnson (R-S.D.) in the statement.

Gabriel Shapiro, general counsel of Delphi Labs, noted a change from the June discussion draft that in his view "completely alters the value prop[osition] of the bill" and would reintroduce the ambiguity it seeks to resolve.

On page 10, the revised bill excludes from the definition of "digital assets" a range of traditional securities such as stocks, bonds, "transferable share[s]," "certificate[s] of interest or participation in any profit-sharing agreement," and so on.

As a result, Shapiro wrote on Twitter, a range of assets found in the decentralized finance (DeFi) market, such as Compound's cTokens or Liquid Collective's Liquid Staking Tokens, "would be highly regulated under this provision even if [they are] not under current law."

"The SEC can still go on the warpath...all they have to do is argue that a token is a 'transferable share' 'a profit interest' etc.," he warned.

UPDATE (July 20, 22:03 UTC): Adds context in third paragraph.

UPDATED (July 20, 23:00 UTC): Adds links to bill and an industry lawyer's early reaction.

Edited by Nelson Wang and Marc Hochstein.


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