The U.S. House of Representatives is preparing to vote on a significant cryptocurrency bill that aims to clarify the regulation of digital assets. The bipartisan “Financial Innovation and Technology for the 21st Century Act” would grant the Commodity Futures Trading Commission (CFTC) the authority to regulate crypto assets as commodities, but only if the blockchain they operate on is decentralized enough. The bill specifies that decentralized blockchains cannot be unilaterally controlled by any individual, and it also prohibits any issuer or affiliated person from exerting control over 20% or more of the digital assets or voting power of a decentralized chain.
On the other hand, if the digital assets are associated with blockchains that are not decentralized, they would fall under the regulation of the Securities and Exchange Commission (SEC) as securities. The bill, sponsored by eight Republicans and three Democrats, is expected to be voted on this week.
The potential legislation has received support from the Blockchain Association, a cryptocurrency lobbying group. Additionally, a16z Crypto, the digital asset investment arm of venture capital firm Andreessen Horowitz, believes that the act would provide a “pathway to safely and effectively launch” blockchain projects in the United States.
While House Democratic leaders do not plan to actively oppose the bill, they have expressed their opposition to it. In an email sent to Democratic House members, the party leadership argues that the bill undermines established legal precedents and case law, leading to uncertainty in the traditional securities market. They also raise concerns about the bill’s provision for a safe harbor, which allows entities to file an “intent to register” and be shielded from SEC rules until the finalization of rules by both the SEC and CFTC. The Democratic leaders believe that this weakens investor protections and opens the door to fraud and market manipulation.
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