Draft Legislation From House Republicans Drums Up Support From Crypto Advocates

New draft legislation is drumming up support among cryptocurrency advocates who cheered its focus on defining what constitutes a security versus a commodity.

Republican lawmakers teamed up on Friday in the US House Financial Services Committee and the House Agriculture Committee on a discussion draft to regulate digital assets.

The legislation seeks clarity on when a digital asset would be considered a security and thereby regulated by the Securities and Exchange Commission, while creating a process on how digital assets are treated and how intermediaries can register with the SEC or Commodity Futures Trading Commission.

“I’m especially encouraged by the attention the authors give to the discussion around what constitutes a security vs a commodity. Hopefully these definitions can settle that protracted debate once and for all,” Coinbase’s Chief Legal Officer Paul Grewal tweeted on Friday afternoon.

I’m especially encouraged by the attention the authors give to the discussion around what constitutes a security vs a commodity. Hopefully these definitions can settle that protracted debate once and for all. 3/3

— paulgrewal.eth (@iampaulgrewal) June 2, 2023

The bill specifically creates a framework that would give the CFTC jurisdiction over digital commodities, while clarifying the SEC’s jurisdiction over “digital assets offered as part of an investment contract.” 

The legislation also creates a framework for when certain digital assets would become decentralized and therefore a commodity under the CFTC, and no longer be under the SEC’s jurisdiction – though the SEC can challenge that. 

Brett Quick, head of government at the Crypto Council for Innovation, tweeted that she was encouraged to see the bill text.

“Establishing clarity and transparency on when a digital asset is a security or a commodity is critical and defining the SEC’s and CFTC’s respective roles is an important step,” Quick said.

Establishing clarity and transparency on when a digital asset is a security or a commodity is critical and defining the SEC's and CFTC's respective roles is an important step.

— Brett Quick (@brettwquick) June 2, 2023

Coordination on the Hill?

Senior policy officials said they were hopeful to talk with Rep. Maxine Waters, D-Calif., who used to chair House Financial Services on the legislation. 

The officials also said the discussion draft was not shared ahead of the announcement on Friday with Democrats. 

The House Agriculture Committee plans to hold a hearing next week on digital assets called the “The Future of Digital Assets: Providing Clarity for Digital Asset Spot Markets.”

Coinbase’s Grewal said he would be testifying at that hearing.