- The Senate Banking Committee released a draft of the Responsible Financial Innovation Act focused on crypto market oversight.
- The bill places most cryptocurrencies under the oversight of the Securities and Exchange Commission (SEC), unlike House proposals that favor the Commodity Futures Trading Commission (CFTC).
- The draft introduces a new exemption called Regulation DA for token offerings and adds innovation to the SEC’s responsibilities.
- The proposal would let banks participate in activities using blockchain and digital assets, such as custody and lending.
- The SEC would also be required to define clear rules on what counts as an investment contract, which may update or replace the traditional Howey Test.
The Senate Banking Committee published a discussion draft of the Responsible Financial Innovation Act yesterday in Washington, D.C. The bill aims to create new rules for the U.S. crypto market and assigns regulatory power to the SEC instead of the CFTC.
The bill, available as a discussion draft, would cover most cryptocurrencies under the SEC. Many of these assets would be exempt from some securities regulations. The Agriculture Committee is expected to propose a separate law focused on commodities and derivatives, but no draft has been released yet.
Supporters argue that the SEC is better equipped for this role because it is much larger than the CFTC and is familiar with investor protection. The bill defines digital assets called “ancillary assets” as being regulated like traditional securities. The SEC has been active in this area recently, while all commissioners at the CFTC have stepped down.
The discussion draft introduces a new regulatory exemption named Regulation DA for token sales and requires the SEC to place a greater focus on fostering innovation and market efficiency. According to Senator Cynthia Lummis, “We cannot allow regulatory confusion to continue driving American innovation overseas… Market structure legislation will establish clear distinctions between digital asset securities and commodities, modernize our regulatory framework, and position the United States as the global leader in digital asset innovation.”
The bill also provides clear authorization for banks to offer services in blockchain and digital assets. These include custody, lending, market-making, and operating blockchain nodes. In addition, the SEC would be directed to create a “Micro-Innovation Sandbox,” allowing companies to test new digital asset products on a limited scale.
A significant feature is a requirement for the SEC to define what qualifies as an investment contract, a term central to whether digital assets meet the current Howey Test. This move could bring more certainty for industry stakeholders.
Further details, analysis, and insights about which assets may fall under SEC jurisdiction are available for Pro subscribers. The main site will continue providing essential news coverage.
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