On 20 July 2023, the Financial Innovation and Technology for the 21st Century Bill was introduced in the US, with the aim of clarifying rules for digital assets and protecting investors in the crypto sector. The bill is a joint effort by the Chairs of a number of Congressional Committees including the House Committee on Agriculture, Subcommittee on Digital Assets, Financial Technology and Inclusion, Subcommittee on Commodity Markets, Digital Assets, and Rural Development. Some of its notable provisions include:
Setting definitions of digital assets
Exempting transactions in digital assets from certain taxes
Registration requirements for digital asset intermediaries with the Securities and Exchange Commission (SEC)
Registration requirements for digital asset intermediaries with the Commodity Futures Trading Commission (CFTC)
Proposed codification of the SEC Hub for Innovation and Financial Technology and LabCFTC
Proposed CFTC-SEC Joint Advisory Committee on Digital Assets
Modernisation of the SEC’s mission
The Bill would establish a regulatory structure for digital assets within the existing authorities of the SEC and the CFTC and create a registration process at both the SEC and CFTC for digital asset market participants. The bill also provides the CFTC with spot market authority over decentralized tokens that do not meet the definition of a security. If passed, this would directly address a key criticism raised by Coinbase, namely that there is no clear path to registering in the US.
The bill is said to have taken into account feedback from stakeholders and industry participants and reflect the draft legislation's intention to:
Provide for a system of regulation of digital assets by the CFTC and the SEC, and for other purposes.
Sponsor Rep. Dusty Johnson commented:
The digital asset space is muddled with regulatory uncertainty, lack of authority, and a lacking framework for core operating principles.
The bill is said to recognize the power of digital assets and blockchain technology to ‘revolutionize [the] financial system’. It has been introduced at a critical time where other jurisdictions are advancing with developing regulatory frameworks for digital assets. The US, by contrast, has mostly lagged behind, with regulators often resorting to regulation by enforcement in the absence of clear guidance.
In relation to how the bill will address this issue, Johnson explained:
our collaborative bill gives both the CFTC and SEC a seat at the table. Our bill establishes clear principles to ensure financial security and certainty as digital asset developers continue to innovate.
Following debate in both the House Financial Services Committee and Agriculture Committee this week, the Committees voted to advance the bill to the House Floor for further debate.