In recent news, U.S. Congressman Tom Emmer has introduced a new bill aiming to provide clarity on the status of digital assets. The proposed bill contains clauses to clarify the classification of digital assets and specify the jurisdiction of each regulator.
Emmer says that the bill essentially amends the securities laws to include “investment contracts asset.” He explains:
The Securities Clarity Act inserts a key term, the “investment contract asset,” into existing securities law to enable crypto projects to reach their full potential in a compliant way, allowing the United States to compete globally in this next iteration of the internet.
In a thread posted on Twitter, Emmer highlighted the need for distinction between digital assets and securities contracts. Reportedly, U.S. laws define an investment contract as a transaction where an individual invests his money in a common enterprise with the expectation of profit from the efforts of a third party.
According to Emmer, if there is no division between the asset and the securities contract, token projects that raise capital to fund development cannot move out of the securities framework once the project is decentralized.
If the bill is passed, it would provide more regulatory clarity on the kind of assets that can be labeled as securities. In the US, the status of cryptocurrencies as securities has been a significant topic of concern in recent times.
Under Gary Gensler, the chief of SEC, the regulator has frequently labeled several crypto projects as securities, under the implication that they meet the definition of the term under the Howey Test because of the presence of an “investment contract.”
Additionally, the regulator has also targeted several reputed crypto firms like Kraken, Paxos, and even Coinbase, and accused them of selling unregistered security. This approach of the SEC and its chief came under intense scrutiny for driving away innovation.
In particular, Gensler has repeatedly highlighted that all crypto assets are securities except Bitcoin and that the existing securities laws are sufficient to regulate them. However, the industry has been hostile to this implication and has severely criticized it saying that the current Securities Act was inadequate to cater to the needs of the industry.
With Emmer proposing this bill, several crypto community stakeholders, including organizations like the Coin Center, Chamber of Digital Commerce, Crypto Council for Innovation, and Blockchain Association, have shown their support for the bill. Jake Chervinsky, a pro-crypto lawyer said:
There’s a crucial difference in securities law between a digital asset on the one hand and an investment contract by which a digital asset is sold on the other. Since the SEC fails to grasp that difference, a bill like this is necessary.
Meanwhile, this is not the first time U.S. lawmakers have tried to introduce new legislation for the crypto industry. Last year, Senator Cynthia Lummis and Kirsten Gillibrand introduced a bipartisan crypto bill to the Senate.
In particular, Emmer has also laid out proposals for regulating the crypto and blockchain space. A few days back, he proposed a bill, named the Blockchain Regulatory Act (BCRA), that aims to reduce confusion among stakeholders and provide more clarity on blockchain management. According to Emmer, the existing definitions are too vague and do not provide clear direction on blockchain technology.