The new administration has a clear mandate to provide a securities regulation pathway for crypto, but it was unclear whether the SEC would take the lead in creating a framework for crypto regulation, or whether legislation being passed by Congress would gain momentum. What is taking shape is a blend of the two, in which the SEC would regulate “digital investment assets” and the CFTC would regulate “digital commodities,” and the two agencies would share regulation of market intermediaries that engage in digital asset trading.
Just last week, Congress nearly passed the Clarity Act, which the House passed last summer. The law was mired in disputes over technical and commercial issues, but was expected to pass last week. According to the New York Times, adoption was only delayed by disagreement over whether stablecoin issuers could pay interest, which could compete with the banking industry. Sponsors have delayed raising the bill, but it seems likely it will pass in the not-too-distant future. (The Genius Act, passed last year, would allow “stablecoin payments” but prohibit the payment of any interest or yield, and its entry into force awaits the adoption of rules by relevant agencies.)
Importantly, the Clarity Act would create a two-track approach, with the SEC regulating digital securities and the CFTC regulating digital products. Howey’s “investment contract” test would survive in the valuation of digital securities, but its scope would be limited. At least the initial version of the law provided that digital securities would become digital products on the secondary market after their issuance. The agencies would share regulatory authority over financial intermediaries that engage in digital asset trading.
Late last year, SEC Chairman Paul Atkins gave a speech affirming his support for the legislation, echoing the distinction between digital securities and digital commodities, and promising a clear “taxonomy” for evaluating and regulating the former.
(See source.)
