The Revamped Crypto Bill: A Game-Changer in the Digital Landscape
Let's Decode the Scene
Proposed Legislation in the House would Eliminate Securities and Exchange Commission (SEC) Control over Main Cryptocurrency Tokens
In a major shakeup, the House Financial Services Committee has presented a fresh discussion draft of its crypto market legislation. This draft proposes to exempt the majority of top digital assets from the Securities and Exchange Commission (SEC) oversight, as per the current form of the bill.
The latest bill proposes to add crucial language to various securities laws, including the Securities Act of 1933 and the Securities Exchange Act of 1934, that would legally exclude "digital commodities" from the security definition.
Digital commodities, as defined in the new bill, are generated through a blockchain system, derive their worth from the system, offer voting rights in a decentralized governance system, or serve as validation for transactions on a blockchain.
Remarkably, the bill also aims to shift the regulation of secondary market trading for these specific digital commodities from the SEC to the Commodity Futures Trading Commission (CFTC). However, the secondary market trading would be exempt from SEC regulation only if the digital assets meet certain criteria, primarily being certified by the SEC as originating from a "mature blockchain system."
But What Makes a Mature Blockchain System?
A mature blockchain system, as per the bill, is one that allows users to execute transactions, access on-chain services, run nodes, or validate transactions. It should be open-source, open to public use, automated, and impossible to be manipulated by a single person or entity (except for cybersecurity or maintenance purposes). Furthermore, no single person or entity can own more than 20% of the token supply for it to qualify as a mature blockchain system.
However, these exemptions for secondary transactions related to digital commodities in mature blockchain systems do not apply to transactions involving direct ownership of a company's revenues, profits, or assets.
The Potential Implications
Tokens such as Ethereum, Solana, XRP, BNB, and Cardano all fall under the definition of "digital commodity." Moreover, most networks behind these popular tokens also seem to meet the definition of a mature blockchain system. Consequently, these digital assets could be regulated by the CFTC instead of the SEC.
However, there is confusion regarding the status of XRP considering Ripple controls more than 20% of its supply, which is a potential issue according to the bill's definition. Also, it remains uncertain if the escrowed XRP held by Ripple would be considered as beneficial ownership.
A Legislative Day to Remember
The new legislation arrives ahead of a cryptocurrency-focused meeting of the House Financial Services Committee on Tuesday. However, the meeting is expected to be heated due to the Democrats' plan to walk out in protest. This walkout, aimed at preventing the hearing from proceeding, stems from the refusal of Republicans to include clauses banning the president from participating in crypto ventures during their tenure.
Sources:
- Decrypt's Art, Fashion, and Entertainment Hub
- Punchbowl News
- CFTC
- Decentralized Governance and Its Impact on Cryptocurrency
- The Role of Blockchains in Decentralized Governance
- The new cryptocurrency bill could exempt digital assets like Ethereum, Solana, XRP, BNB, and Cardano from Securities and Exchange Commission (SEC) oversight, as they are classified as "digital commodities" generated through a blockchain system.
- If approved, these digital commodities would be regulated by the Commodity Futures Trading Commission (CFTC) instead of the SEC, providing a more decentralized approach to crypto market finance and business.
- A mature blockchain system, as defined in the bill, is one that allows users to execute transactions, access on-chain services, run nodes, or validate transactions, and it must be open-source, open to public use, automated, and impossible to manipulate by a single person or entity.
- Tokens such as Ethereum's ether (ETH) could potentially benefit from this shift in regulation due to their decentralized nature and maturity of their blockchain system.
- However, the status of XRP, which Ripple controls more than 20% of its supply, may create issues with regard to meeting the criteria for a mature blockchain system as per the bill's definition.
- The new crypto bill has stirred controversy, with Democrats planning to walk out of a cryptocurrency-focused meeting of the House Financial Services Committee on Tuesday in protest over the exclusion of clauses banning the president from participating in crypto ventures during their tenure.
- In the decentralized finance (DeFi) sector, stablecoins play a significant role, providing a more stable digital asset alternative for transactions within the crypto market, and they may also fall under the definition of "digital commodities" if they meet the criteria for a mature blockchain system.
