A bill from Republicans, sponsored by Reps. Patrick McHenry and Glenn Thompson, aims to provide a clearer regulatory plan for crypto assets and exchanges. In summary, the bill would:
- Define the roles of the SEC and the CFTC on crypto issues. The SEC would regulate digital asset securities, while the CFTC would oversee crypto commodities.
- Allow crypto securities to be traded on alternative trading systems, both under the SEC’s purview.
- Prohibit the SEC from preventing such platforms from listing crypto securities and require the SEC to modify its rules to allow broker-dealers to custody digital assets.
- Exempt SEC-certified assets from registering as securities, including DeFi assets.
The bill comes amid expansive enforcement actions by the SEC against crypto entities, such as Gemini, Genesis, and Kraken, for allegedly offering unregistered securities.
Some crypto exchanges, such as Coinbase, have responded by moving operations offshore or facing legal battles with the SEC. The bill is a powerful vote of support from two influential Republican members. Though it remains to be seen how it may be reshaped and modified in the coming months.
What is the difference between a security and a commodity?
A security is a financial instrument that represents an ownership or debt claim on an entity, such as a company or a government. Securities can generate income or capital gains for the investors who hold them. Securities are issued by the entities and traded on regulated markets. Examples of securities are stocks, bonds, and mutual funds
A commodity is a basic good that can be used or consumed by anyone and has a standardized quality and quantity. Commodities are often considered stores of value that can hedge against inflation or currency fluctuations. Commodities are traded on spot or futures markets between buyers and sellers. Examples of commodities are oil, gold, wheat, and coffee
What is the SEC and CFTC?
The SEC and CFTC are two federal agencies that regulate different aspects of the financial markets in the US.
SEC stands for the Securities and Exchange Commission.
It is an independent agency that oversees the securities markets, such as stocks, bonds, mutual funds, and investment contracts. The SEC's mission is to protect investors, maintain fair and orderly markets, and facilitate capital formation. The SEC enforces federal securities laws and regulations, registers securities offerings and entities, reviews corporate disclosures, and investigates fraud and misconduct.
CFTC stands for the Commodity Futures Trading Commission.
It is an independent agency that regulates the derivatives markets, such as futures, swaps, and options. The CFTC's mission is to promote the integrity, resilience, and vibrancy of the derivatives markets through sound regulation. The CFTC enforces federal commodity laws and regulations, registers derivatives entities and platforms, monitors market activity and risk, and investigates manipulation and abuse.
Interested readers may use this link to read the draft:
https://docs.house.gov/meetings/AG/AG00/20230606/116051/HHRG-118-AG00-20230606-SD002.pdf
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