A number of bills concerning digital asset regulation have been advanced in the US recently, marking 'the most significant legislative moment' in the US for the digital assets industry. The crypto regulatory bill progressing past the House Committees is a victory for the market participants who have sought regulatory clarity for some time. During the markup, Representative Patrick McHenry of the House Financial Services Committee announced:
As other jurisdictions like the UK, the [European Union], Singapore... have moved forward with clear regulatory frameworks for digital assets, the United States is at risk of falling behind. We intend to change that today.
Clarity for Payment Stablecoins Act was passed in the US House of Representatives on 27 July 2023, with an aim to establish a clear regulatory framework for asset backed stablecoins, to promote financial innovation without sacrificing investor protection and confidence. Notable provisions of the bill include:
Mandatory disclosure requirements for assets held as reserves
Establishing audit standards and promoting compliance
Mandated controls concerning liquidity, capital requirements and risk management
The bill emphasised the view that:
Establishing a culture of compliance is a benefit to the long-term health of stablecoin issuers and will be a key mandate made by regulators when considering new applications under specific regulatory regimes.
While the bill awaits a difficult passage through the Senate, the proposed framework reflects a step in the right direction.
Following its introduction on 20 July 2023, the bill was approved by the House Financial Services Committee (FSC) in a 35 to 15 vote and passed the House Agriculture Committee on 27 July. Importantly, this bill seeks to steer the US away from arbitrary regulation by enforcement by providing a ‘system of regulation of digital assets’ for the regulators. It contains provisions including a proposed joint committee between the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC), as well as registration requirements for each regulator.
This bipartisan bill sponsored by Republican Representative Tom Emmer and Democratic Representative Darren Soto also passed a vote in the FSC. The 2023 BRCA marks the fourth introduction of the bill since 2018, with all previous proposals failing to be implemented. In respect of the crypto framework, Tom Emmer warned:
If Congress does nothing, the United States will miss a huge opportunity and Americans will suffer for it.
A clear regulatory framework for digital assets is not only necessary for consumer protection but also required to ensure the regulators have clear guidelines by which it exercises power. If implemented, the bills are expected to facilitate financial innovation while ensuring consumer confidence and security.
In Australia, there have been some attempts to regulate digital assets, with the Treasury conducting consultations on token mapping and crypto asset secondary service providers and recommendations published by the Senate Select Committee on Australia as a Technology and Financial Centre on digital asset regulation.
In particular, Digital Assets (Market Regulation) Act introduced by Senator Bragg proposes to establish a licensing regime and set reporting requirements for exchanges. While it was brought forward in an ambition to save Australia from ‘losing the race to regulate digital assets’, the success rate of private members’ bills is low, making the bill unlikely to be adopted by the government in its current shape, but it remains an important step in shaping the understanding and policy treatment of digital assets.
With the US aggressively marching towards crypto legislation and other jurisdictions like Singapore, Hong Kong and UK all striving to create crypto-friendly frameworks to become the next crypto hub, Australia will have to move swiftly if we want to have a chance of catching up and bring innovation back onshore.