Operating frameworks – and at least some guidelines on just what cryptocurrencies are and how they should be used – may be in the offing sooner rather than later. On Tuesday (April 20), the U.S. House of Representatives passed several pieces of legislation focused on financial services – with one key bill aiming for clarity and transparency in the crypto space through a working group staffed by individuals from two regulatory commissions.
House Resolution 1602, officially titled the “Eliminate Barriers to Innovation Act,” would mandate that the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) set up a working group known as the “SEC and CFTC Working Group on Digital Assets,” which would submit a report (within a year) that analyzes the legal and regulatory framework tied to digital assets.
Frameworks And Impacts
The group will analyze “the impact that lack of clarity in such a framework has on primary and secondary markets in digital assets,” and how current regimes impact the competitive position of the U.S. when it comes to digital assets. Recommendations are directed to focus on the creation, maintenance and improvement of primary and secondary markets in digital assets, including improving the fairness, transparency and orderliness of these markets.
In terms of operations of crypto players, the group is tasked with setting standards for custody, private key management, cybersecurity and continuity related to digital asset intermediaries.
The bill was introduced in March by Rep. Patrick McHenry (R-North Carolina), the ranking Republican on the House Financial Services Committee. Upon introducing the bill last month, McHenry said in a statement that “establishing this working group is an important step to provide necessary regulatory clarity. By ensuring increased collaboration, we can create an environment that encourages innovation rather than holding it back. Digital assets have untold potential benefits for consumers, American businesses and our standing as a world leader in developing these technologies.”
The creation of the working group is a nod to some of the basic issues confronting cryptocurrency investors, speculators and those who would leverage the digital offerings to be used, in a wider way, across mainstream commerce.
As PYMNTS reported earlier this week, the SEC filed suit against Ripple at the end of last year hinges on the very use and definition of digital coins. The SEC maintains that Ripple’s XRP digital coin is a security and is thus subject to regulation. Ripple has countered that XRP is used as a medium of exchange in transactions (moving between jurisdictions), and thus is not defined as a security and cannot be treated as such by the SEC. SEC Chairman Gary Gensler has said cryptos will be a priority under his watch.
In at least one signal that the developers and firms behind crypto launches may have at least some room to maneuver as issues of clarity are settled, Hester Peirce, an SEC commissioner, debuted a Token Safe Harbor Proposal 2.0. That safe harbor would give network developers a three-year “grace period” where they would be exempt from registration provision of federal securities laws as they develop functional or decentralized networks. At the end of the three-year period, there would be an exit report that “would include either an analysis by outside counsel explaining why the network is decentralized or functional, or an announcement that the tokens will be registered under the Securities Exchange Act of 1934.”
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