- Current U.S. securities laws are incompatible with digital assets, according to testimony at a House Committee hearing on April 9.
- Projects attempting to register tokens with the SEC face insurmountable regulatory hurdles, with virtually none succeeding.
- Congress is working on comprehensive digital asset legislation, following recent advancement of stablecoin bills.
The current U.S. securities regulatory framework is fundamentally unsuited for digital assets, Rodrigo Seira, special counsel at Cooley LLP, testified before a House Committee hearing on April 9. Seira emphasized that crypto companies face significant barriers when trying to comply with Securities and Exchange Commission (SEC) requirements, with most attempts ending in failure.
The hearing, titled “American Innovation and the Future of Digital Assets Aligning the U.S. Securities Laws for the Digital Age,” featured testimony from legal and industry experts including Tiffany J. Smith from WilmerHale, Jake Werrett from Polygon, and Alexandra Thorn from the Center for American Progress.
“It is clear that the current securities regulatory framework is not a viable option to regulate crypto. It fails to achieve its stated policy goals,” Seira stated in his opening remarks. He further argued that “the idea that crypto projects can come in and register with the SEC is demonstrably false.”
While acknowledging that crypto fundraising should be subject to securities laws, Seira highlighted the practical impossibility of compliance: “In practice, however, virtually no crypto projects have successfully registered their tokens under federal securities laws and lived to tell the tale.” He explained that registration triggers ongoing public reporting requirements that are unsustainable for most projects.
Congressional Progress on Crypto Regulation
Representative Bryan Steil, who chairs the Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence, noted that lawmakers are working to address regulatory challenges created by the previous administration.
Recent progress includes the advancement of the STABLE Act through the House Financial Services Committee last week. This legislation aims to regulate stablecoins pegged to the US dollar and other fiat currencies. Additionally, the Senate Banking Committee previously advanced the GENIUS Act, which establishes reserve requirements and anti-money laundering compliance for stablecoin issuers.
Future Regulatory Framework
Steil indicated that the next legislative priority is “advancing the second half of this agenda: comprehensive digital asset market structure legislation.” Such a framework would clarify digital asset classifications and define the roles of regulatory agencies like the SEC and Commodity Futures Trading Commission.
Representative Ro Khanna expressed optimism at a recent conference that market structure legislation would be completed this year, potentially providing the clear regulatory guidelines that industry participants have been seeking.
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