House Republican Leaders Release Discussion Draft To Draw Clear Lines on Digital Asset Definitions

Republican lawmakers in the US House Financial Services Committee and the House Agriculture Committee have collaborated to draft legislation aimed at regulating digital assets. The legislation, which was recently released, seeks to bring clarity to the classification of digital assets as securities, thereby subjecting them to regulation by the Securities and Exchange Commission (SEC). It also establishes a process for the treatment of digital assets and the registration of intermediaries with either the SEC or the Commodity Futures Trading Commission (CFTC).

During the previous Congress, both House Financial Services Chair Patrick T. McHenry and House Agriculture Chair Glenn “GT” Thompson worked together to find a way forward, as per sources familiar with the drafting process.

The proposed legislation, known as the Digital Asset Market Structure Discussion Draft, creates a framework that grants the CFTC jurisdiction over digital commodities. It also clarifies the SEC’s authority over “digital assets offered as part of an investment contract.” Moreover, the legislation requires collaborative rulemaking between the SEC and CFTC regarding specific terms and the oversight of exchanges that hold dual registration.

Additionally, the legislation establishes guidelines for determining when certain digital assets become decentralized, thus falling under the jurisdiction of the CFTC as commodities and no longer within the purview of the SEC. However, the SEC retains the power to object and provide a detailed analysis.

The legislation may also pave the way for the formation of a joint CFTC-SEC Advisory Committee on Digital Assets, which would provide guidance to both agencies and initiate a joint study on decentralized finance.

Lawmakers are making bipartisan efforts to find common ground as they plan to introduce their own bills to regulate cryptocurrency. They express the hope of engaging in discussions with Rep. Maxine Waters, a Democrat from California who previously chaired the House Financial Services Committee.

It is important to note that the discussion draft was not shared with Democrats prior to the Friday announcement, according to senior policy officials.

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

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