US House Republicans Unite to Propose Comprehensive Digital Assets Legislation

Republican lawmakers in the United States House have taken a significant step towards creating a regulatory framework for digital assets by introducing a joint bill. The proposed legislation, known as the “Financial Innovation and Technology for the 21st Century Act,” is the outcome of collaborative efforts between members of the Agriculture and Financial Services Committees and spans an extensive 212 pages.

The primary objective of this bill is to address regulatory gaps in the digital asset space by establishing a comprehensive framework tailored to the specific risks associated with various digital asset-related activities. Among its key provisions, the bill grants the Commodity Futures Trading Commission (CFTC) jurisdiction over digital commodities, clarifies the jurisdiction of the Securities and Exchange Commission (SEC), and lays out a process for converting digital assets initially deemed securities into commodities for sale.

In determining what qualifies as a digital asset commodity, the bill emphasizes decentralization as a crucial criterion. Consequently, digital asset commodities that meet the defined conditions could be traded on SEC-registered digital asset trading platforms. Notably, market participants engaging in these activities would be subject to more extensive disclosure requirements and could be required to register with both the CFTC and the SEC.

Additionally, the proposed legislation mandates collaboration between U.S. regulatory agencies and their foreign counterparts to establish consistent global standards for regulating digital assets. Moreover, the bill calls for the Government Accountability Office (GAO) to conduct a study on nonfungible tokens (NFTs) and their integration within traditional marketplaces, recognizing the increasing relevance of NFTs in the digital asset landscape.

The bill enjoys bipartisan support, with notable cosponsors including Representatives French Hill, Dusty Johnson, Glenn Thompson, Tom Emmer, and Warren Davidson. Demonstrating their commitment to the cause, Hill and Johnson addressed a letter to SEC Chair Gary Gensler before the bill’s introduction, expressing concerns about the agency’s “regulation by enforcement” approach to the cryptocurrency industry.

The explanatory materials accompanying the bill also criticize the SEC’s current regulatory regime, asserting that it lacks the necessary clarity for digital asset entities to operate effectively. This legislation aims to provide the much-needed regulatory certainty and guidance required to foster responsible growth in the digital asset space.

In a parallel development, Senators Cynthia Lummis and Kirsten Gillibrand recently introduced the bipartisan Responsible Financial Innovation Act, presenting another potential avenue for shaping digital asset regulation. As these bills compete for attention and support, the digital asset industry and market participants will be keenly watching the progress and implications of both proposals.

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