On Tuesday, the House of Representatives passed a bi-partisan bill called the ‘‘Eliminate Barriers to Innovation Act of 2021’’ (H.R. 1602) that, if passed by the Senate and enacted into law, would create a digital assets working group between the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC). The bill is co-sponsored by Majority Leader Patrick McHenry (R-NC) of the House Financial Services Committeeand Chairman Stephen Lynch (D-MA) of the FinTech Task Force.
Republican Leader McHenry said during the debate on the House floor, “What we need is conversation between those two entities (SEC and CFTC) about the nature of digital assets and cryptocurrencies.” McHenry lamented that each agency separately views these new markets as either securities or commodities, leaving a gap he described as regulating neither “…fish nor fowl when it comes to this new creation.”
“American citizens are missing out on innovation and the upside of those innovations…This one of the few pieces of tech in the last 100 years that the U.S. has not been the drivers of…” stated McHenry.
The cworking group would be the first of its kind in the United States if passed by the Senate and enacted into law by President Biden. According to the bill, the members of the digital assets working group must be made up of a combination of employees from both the SEC and CFTC as well as at least one representative from the following six categories:
(I) Financial technology companies providing digital assets;
2) Financial firms under the jurisdiction of the SEC or CFTC;
3) Institutions or organizations engaged in academic research or advocacy on digital assets;
4) small businesses engaged in financial technology;
5) investor protection organizations;
6) Institutions and organizations that support investment in historically-underserved businesses.
Within one year, the new working group would need to provide a report on the legal and regulatory frameworks related to digital assets, including the impact that a lack of clarity of digital assets has had on primary and secondary markets. The group must also examine the impact of the regulatory regime on our competitiveness of the U.S. versus other countries. The group would be required to provide recommendations on the following for digital assets:
(1) provide recommendations on improvements in the primary and secondary digital asset markets;
(2) standards for custody and private key management on digital asset intermediaries;
(3) to reduce fraud and manipulation in cash, leveraged, and derivative markets, increase investor protections for participants, and comply with the Bank Secrecy Act (BSA) obligations.
The report would be sent to both the relevant House and Senate Committees as well as the SEC and CFTC.
House Debate Discusses How The U.S. Is Behind On Bitcoin And Crypto
In speaking in favor of his bill, McHenry said, “The fact is the Bitcoin white paper written by somebody that called themselves Satoshi Nakamoto is more than a decade old.” McHenry further stated the “…new creation of cryptocurrencies is now valued over $2 Trillion dollars globally.”
Chairman Lynch of the FinTech Task Force, the Democrat leader who co-sponsored the bill, spoke on the House floor about the proliferation of digital assets around the world. “…by one estimate, there are 4,000 cryptocurrencies and digital tokens in use today,” said Lynch.
Lynch noted the U.S. historically creates new regulations after a financial disaster and cited his bill as an opportunity to create regulations prior to such a potential financial disaster. Speaking positively on the upside of the new markets for the U.S. economy, Lynch stated,. “Digital assets have the potential to improving make transactions more efficient, improve the raising of capital for small businesses, and increase inclusion in the financial system.”
The bill can be viewed here and will next be reviewed by the U.S. Senate. Additional Representatives co-sponsoring the bill include Rep. Glenn Thompson (R-PA), Rep. Ted Budd (R-NC) and Rep. Warren Davidson (R-OH).