The House Financial Services and Agriculture Committee leaders have taken a significant step towards regulating the crypto industry in the US by publishing a discussion draft of a federal crypto framework on May 5. This draft legislation, released by House Financial Services Chairman French Hill, Agriculture Committee Chairman Glenn “G.T.” Thompson, Financial Services Subcommittee Chair on Digital Assets Bryan Steil, and Agriculture Subcommittee Chair on Commodity Markets Dusty Johnson, aims to establish a regulatory framework that will protect consumers while maintaining the country’s leadership in digital innovation.
One of the key aspects of the proposed legislation is the introduction of classifications for digital assets. The bill defines important industry concepts such as digital commodity, blockchain system, decentralized governance, permitted payment stablecoin, and mature blockchain system. It also clarifies that distributions through mining, staking, or user rewards, known as “end user distributions,” are not considered securities or sales under existing laws.
The draft legislation also sets out registration pathways for digital commodity exchanges, brokers, and dealers under the Commodity Futures Trading Commission (CFTC), while allowing the Securities and Exchange Commission (SEC) to oversee securities and certain hybrid assets. Entities involved in custody functions, trading facilitation, or customer interfacing will be required to adhere to new registration and disclosure procedures.
Subcommittee Chair Steil emphasized the importance of the proposed framework, stating that it marks the beginning of the golden age of digital assets and positions the US as a leader in the field. Johnson echoed this sentiment, highlighting the need for a sensible regulatory regime to maintain the country’s status as a global hub for crypto investment and innovation.
The draft legislation also includes provisions to protect decentralized finance (DeFi) protocols and self-custody practices. It excludes DeFi trading protocols and messaging systems from traditional financial regulations as long as they do not have custody or discretion over user funds. Additionally, the bill prohibits the Treasury or the Financial Crimes Enforcement Network (FinCEN) from issuing rules that restrict individuals’ ability to self-custody crypto through wallets.
To kickstart the legislative process, the committees have scheduled a joint hearing titled “American Innovation and the Future of Digital Assets: A Blueprint for the 21st Century” on May 6. This hearing will mark the beginning of formal legislative discussions and will provide an opportunity to gather input from stakeholders. The draft legislation also includes provisions for joint rulemaking by the SEC and CFTC, as well as studies on DeFi, non-fungible tokens (NFTs), and blockchain infrastructure through expanded innovation offices at federal agencies.
Overall, the proposed federal crypto framework aims to bring clarity to the regulatory landscape surrounding digital assets in the US. By establishing clear definitions and jurisdictional lines, the bill seeks to eliminate uncertainty in crypto regulation while promoting responsible development and oversight of digital asset markets.