Revised Crypto Oversight Bill Gives CFTC and SEC ‘Seat at the Table’

Industry watchers were divided on whether the new digital asset bill provided much-needed regulatory clarity for the industry, or whether it spelled the end for DeFi.

U.S. Republicans introduced a bill titled the “Financial Innovation and Technology for the 21st Century Act” as part of an effort to establish a regulatory framework for the digital asset space.

The bill aims to put forth a path for crypto firms to register with the U.S. Securities and Exchange Commission (SEC) so that they can facilitate trading of digital assets, commodities and stablecoins on a single venue. 

“The crypto industry wants clarity and 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,” wrote Rep. Dusty Johnson. 

Earlier this week, Johnson penned a letter to SEC Chair Gary Gensler expressing his concerns over the agency’s regulation by enforcement approach to crypto firms. 

The 212-page document outlines a process for digital assets that were deemed to be securities to be sold as commodities, gives the Commodities and Futures Trading Commission (CFTC) jurisdiction over digital commodities and clarifies the SEC’s jurisdiction over crypto assets. 

While the framework would set in place more comprehensive disclosure requirements for crypto firms, some market participants hailed the bill for being a meaningful step forward towards encouraging digital asset innovation.

In particular, the crypto community praised an accompanying document that separated myths from facts with respect to digital assets.

Woah ya’ll need to read the “Myth vs Fact” doc they’ve put together on the site there.

It goes hard against the SEC and even has a section explaining the benefits of digital assets (!). https://t.co/D2jrMn92KT pic.twitter.com/cysmS0ylzf

— { creative: drewy } (@creativedrewy) July 20, 2023

However, others expressed concern over the language used in certain sections, which expands current regulations to non-contractual agreements like decentralized finance (DeFi). 

According to Gabriel Shapiro, general counsel at Delphi Labs, the bill actually re-empowers the SEC and could potentially be a “backdoor DeFi prohibition.”

Was a huge fan of this bill and they took a lot of feedback but unfortunately they made one change that completely alters the value prop of the bill, reintros massive ambiguity, re-empowers SEC enforcement and would wreak havoc on DeFi…. https://t.co/anYMXpAIoN pic.twitter.com/QXeAXd2Rz9

— _gabrielShapir0 (@lex_node) July 20, 2023

“The SEC can still go on the warpath…all they have to do is argue that a token is a ‘transferable share’ ‘a profit interest’ etc,” said Shapiro.