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This bill, as described in a letter from a16z, aims at providing a clear definition of the roles and responsibilities of the SEC and the CFTC in crypto regulation to ensure that digital assets have a clear legal regime.
While some industry players raised concerns as to the overly stringent decentralization provisions and possible redundancies of jurisdictions, the bill is viewed as a positive step towards the definitive regulation.
This bill has support from the House Committee on Financial Services and the House Committee on Agriculture, with equal representation from Democrats and Republicans.
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The SEC has sought to identify which of the digital assets qualify as securities, while the CFTC has endeavored to identify which of the digital assets qualify as commodities. The bill seeks to classify an asset as a security if its underlying blockchain has not attained sufficient decentralization.
Besides, the bill proposes consumer protection measures for crypto exchanges, such as separating customer funds, lock-up periods for token insiders, and disclosure requirements.
Amid the ongoing uncertainty on regulation in the U.S., the SEC has assumed the position of primary regulator of the crypto industry, carrying out multiple enforcement actions against crypto-related firms. Some of these actions have been demonstrated in its lawsuits against Coinbase and Binance exchanges.
Following the lawsuit on Coinbase, the exchange contended that the SEC’s classification of cryptocurrencies listed on its platform as securities constitutes an overreach, as the company makes its final effort to dismiss the lawsuit.
The CEO of Binance also stated that its lawsuit against the SEC led to banking institutions withdrawing support from the exchange. He claimed it led to significant operational disruptions.
Ripple has also continued to battle the SEC, with its lawsuits now in the remedies phase. The broader crypto community has bemoaned these enforcement actions, advocating for clearer rules. On May 10, the House Financial Services Committee announced its plan to review the FIT21 Act.
House Financial Services Committee Chairman Patrick McHenry highlighted the significance of the FIT21 Act in resolving persistent regulatory ambiguities.
“For far too long, the U.S. digital asset ecosystem has been plagued by regulatory uncertainty that has stifled innovation and left consumers unprotected.” U.S. Rep. Patrick McHenry said.