In a draft bill posted on Friday afternoon, Reps. Patrick McHenry, R-North Carolina, and Glenn Thompson, R-Pennsylvania, outline how they believe the SEC and CFTC should divide up responsibility for crypto regulation.
Top House Republicans have shifted their focus to cryptocurrency with a new legislation plan after congressional leaders were able to reach an agreement and send a debt ceiling accord to President Biden’s desk.
The proposed method is concentrated on token categorization, CFTC and SEC jurisdictions, and granting access to cryptocurrency trading.
Proposed authority for SEC
Payment stablecoins and digital commodities would not be considered securities by the U.S. Securities and Exchange Commission (SEC) under the proposed guidelines.
The regulations would prevent the SEC from refusing exemptions to certain trading platforms only because they provide digital assets. The SEC would not regulate “ancillary activities” like providing wallets, publishing software, and running nodes.
In addition, the SEC would have to update and modify its regulations on digital assets in general and client safety in particular.
However, the regulations would empower the SEC’s anti-fraud powers over specific crypto commodity transactions. A party that registers with the SEC but also offers cash and spot markets must also register with the CFTC.
Proposed authority for CFTC
On the other hand, the proposed regulations would grant the Commodity Futures Trading Commission (CFTC) greater control over the cash and spot markets for digital commodities.
Transactions involving digital commodities and payment stablecoins on platforms that register with the CFTC would come under its authority. But such stablecoins’ development and management would remain outside the control of the CFTC.
The law specifies the conditions under which digital commodity exchanges must register with the CFTC, as well as the method by which services must choose the assets that may be traded on platforms that have registered. Additionally, it permits the CFTC to establish standards for digital asset custodians, but it forbids direct CFTC regulation of those custodians.
Along with creating new regulatory committees, the plan would also launch projects and research and create a joint advisory between the CFTC and SEC.
The bill’s promoter, Rep. Patrick McHenry, described the draught as a “step towards… clear rules of the road.” He noted that the legislation seeks to strike a balance between “consumer protection and encouraging responsible innovation.”
Democrats have not provided input on the plan because it is still in its early stages.
