Lawmakers in the United States House Financial Services Committee and House Agriculture Committee have released a draft bill offering regulatory clarity and a functional framework for certain crypto assets.
The proposed bill aims to categorize cryptocurrencies as either securities or commodities based on the decentralization of their underlying blockchain. Cryptocurrencies offered as investment contracts would be regulated by the U.S. Securities and Exchange Commission (SEC), while those classified as commodities would be overseen by the Commodity Futures Trading Commission.
The classification of cryptocurrencies like Bitcoin, Ethereum, Binance’s BNB or Ripple’s XRP as securities or commodities will depend on how decentralized their underlying blockchain is. An SEC ruling will be the final call.
Today’s market regulation bill from @PatrickMcHenry and @CongressmanGT lays a strong foundation for regulatory jurisdiction and definitions, BD rules, and consumer protections. I’m eager to share more on this next Tuesday before the @houseaggop. 1/3 https://t.co/g9qceFwmcS
— paulgrewal.eth (@iampaulgrewal) June 2, 2023
The bill comes after major U.S. bitcoin and crypto companies raised concerns about the country’s lagging crypto legislation. Hong Kong and the European Union have implemented new regulatory frameworks, highlighting the need for action in the U.S.
Paul Grewal, the chief legal officer at cryptocurrency exchange Coinbase, posted on Twitter how the bill can “lay a strong foundation for regulatory jurisdiction and definitions.”
“A comprehensive bill of this magnitude warrants an in-depth review, which we’ll be conducting over the coming days, but what we’re seeing so far is encouraging,” Grewal said on Twitter, adding that he was hopeful the new framework can settle the debate in the industry once and for all.
Ryan Selkis, the founder of crypto data company Messari, shared the excitement, calling it “a win” for crypto to receive such attention.
“There is still a lot of work to do to get to a viable piece of legislation, but this is a good starting point for a sensible market structure bill,” wrote Selkis on the same platform.
1/ BIG NEWS:
A new market structure bill just dropped in Congress. It’s a win this year for crypto to even get some attention in DC right now, after last year’s setbacks.
What this means 👇
— Ryan Selkis 🪳 (@twobitidiot) June 2, 2023
New regulatory framework amid volatile market
Crypto exchanges, such as Coinbase, have been feuding with regulators regarding the classification of certain cryptocurrencies as unregistered securities. Similarly, the SEC sued Ripple, alleging that the company had sold $1.3 billion worth of unregistered securities through its XRP cryptocurrency.
These exchanges have expressed concerns regarding the SEC’s lack of clear rules in the crypto space.
The proposed bill’s framework will prevent the SEC from rejecting digital asset trading platforms’ registration as regulated alternative trading systems. Should the SEC reject any proposal, it would be required to provide a detailed analysis of any objections to a firm’s classification as decentralized.
Then, these platforms can offer “digital commodities and payment stablecoins” to users.
The cryptocurrency market is currently in a volatile state. Arthur Hayes, the former CEO of cryptocurrency exchange Bitmex, has expressed his prediction of a potentially explosive situation in the crypto market, referring to it as a “powder keg.”
Bitcoin, Ethereum, Ripple’s XRP and Binance’s BNB, among the top five cryptocurrencies, have experienced significant growth in 2023, contributing $350 billion to the crypto market. This surge has led to numerous optimistic forecasts and bullish predictions.
“You’re basically putting this powder keg together of a situation that’s going to be exploding in [the third and fourth quarter] of this year, and I think, ultimately, it will be good for Bitcoin,” said Hayes in the What Bitcoin Did podcast.
Hayes also predicts that Bitcoin, in particular, will experience a surge in price next year following its fourth halving of supply, similar to previous occurrences.
At the same time, JPMorgan analysts warned that both crypto and stock markets are closely monitoring the potential impact of the U.S. Treasury’s efforts to replenish its funds.