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A group of US House Republicans on Thursday formally delivered on a crypto oversight bill meant to bring more clarity to the digital assets sector with respect to investor protection. The 212-page submission, whose draft was previewed last month, seeks to establish a regulatory framework guiding the provisional registration of crypto companies with relevant authorities.
Tweaks to June's draft version
The updated version retained focused on the regulatory roles of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). It proposed that the SEC and CFTC hold joint rulemaking powers, i.e., formulate and issue digital asset rules that guide entities operating trading avenues. The former authority will focus on digital assets securities, while digital commodities markets such as exchanges and broker-dealers will be under the latter's supervision.
The bill also defined a new disclosure regime for digital asset issuers and a clear guidance process for digital assets that start as securities but evolve into commodities.
“Currently, neither the CFTC nor SEC has the authority to register and regulate entities engaged in a non-security digital asset, or digital commodity, spot transactions. The CFTC only has the authority to prosecute those entities if the CFTC believes the entity has committed fraud or manipulation related to a non-security digital asset, or digital commodity, spot transaction,” the House Republicans justified in the explainer.
The House Financial Services and Agriculture Committees are expected to deliberate on the bill next week and decide on it progression to the full House floor. The Financial Services Committee will be first to have at its part on Wednesday, while the Agriculture Committee will debate its scope the next day. Notwithstanding the recommendations for joint oversight of the sector where the SEC and CFTC have independent scopes, the bill will likely see opposition in Congress.
House Democrats have, on past occasions, called for the SEC to have greater authority than Thursday's bill provides. It is worth noting that the latest Republican efforts match up to the bipartisan Responsible Financial Innovation Act (RFIA), whose proposal was submitted to the Senate last Wednesday.
UK government doesn’t intend to regulate crypto as gambling, warns of misalignment
Meanwhile in the UK, the Finance Ministry rejected a proposal introduced in May, seeking to regulate crypto trading activities like gambling.
Economic Secretary to the HM Treasury Andrew Griffith disagreed with the recommendation to treat “retail trading and investment activity in unbacked crypto assets as gambling rather than as a financial service” which was presented by the Parliament's Treasury Select Committee. The committee previously implied in May that the likes of Bitcoin and Ether are unbacked assets that lack intrinsic value and bear significant risks to the public.
Perceiving crypto trading activity as gambling, Griffiths said, is discordant with existing guidance from global and European Union standard-setting bodies. Last October, the UK Financial Stability Board published guidelines for regulating the digital assets sector in a consultative document and recently outlined more standards. Separately, the International Organization of Securities Commissions (IOSCO) brought forth the world's first set of rules for the crypto sector in May.
The Economic Secretary also noted that regulating the industry under the gambling umbrella doesn’t comprehensively address risks such as “market manipulation, inadequate prudential arrangements, and deficiencies in core financial risk management practices.”
Following last month's approval in the UK upper chamber of Parliament, King Charles assented to a bill bringing cryptocurrencies and stablecoins under the scope of payments rules in late June. The Financial Services and Markets Bill Act empowers regulators in their bid to carry supervisory oversight over digital assets and other financial systems. The landmark legislative piece saw amendments during its discussion in Parliament – notable among them stipulations to treat crypto as a regulated activity and supervise advertisements from local crypto service providers.
This week, the UK's Financial Conduct Authority said it plans to shape the prudential requirements for crypto firms. The regulator conveyed in its annual report released Thursday that it will consult on the rules after receiving the green light to act on them from the Treasury and Parliament.