Two Republican lawmakers released a draft piece of legislation Friday outlining a regulatory plan for digital assets, divvying up authority over crypto between the Commodity Futures Trading Commission and Securities and Exchange Commission.
The 162-page discussion draft, authored by House Financial Services Committee Chairman Patrick McHenry, R-NC, and House Agriculture Committee Chairman Glenn Thompson, R-PA, is intended to be “a jumping off point for discussions between Republicans and Democrats on the two committees, as well as with the Senate, regulators and the private sector,” Bloomberg reported, citing senior staff familiar with the proposal’s drafting.
Under the bill, the CFTC would oversee all digital assets that qualify as commodities, while tokens offered within an investment contract would fall under the purview of the SEC.
To qualify as a commodity, a digital asset’s network must be “decentralized,” meaning that over the last 12 months, no person or entity “had the unilateral authority, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise, to control or materially alter the functionality or operation of the blockchain network.”
The bill would give the SEC the ability to object to a digital asset being considered as a commodity, but would need to provide “a detailed analysis” of its reasons for the objection.
Regulated crypto firms also could make the case that the assets they work with are commodities. To do so, the firms must explain how they work and prove that they’re decentralized by showing that no one entity controls more than 20% of its assets.
The draft bill also addresses custody of digital assets, and would require the SEC to rewrite current rules to allow broker-dealers to have custody of digital assets if certain requirements are met.
That would likely include a rewrite of certain rules regarding obstacles banks face in digital asset custody, including staff accounting bulletin 121, which pertains to the safeguarding of crypto assets, according to American Banker.
The House discussion draft is one of several crypto related bills put forward this year, following the publication of a House draft bill on stablecoin regulation in April, and state legislation proposed by New York Attorney General Letitia James in May.
