The United States proposes a new regulatory framework for encryption assets, clarifying the responsibilities of the SEC and CFTC.

U.S. lawmakers propose new framework for encryption asset regulation

On May 5th, the leaders of two important committees in the U.S. Congress released a discussion draft aimed at establishing a federal regulatory framework for the U.S. encryption asset industry. This draft was jointly issued by key members of the House Financial Services Committee and the Agriculture Committee, with the purpose of coordinating responsibilities among regulatory agencies and providing legal definitions for key concepts in the blockchain and encryption asset markets.

The main sponsors of the draft include Republican lawmakers from different states, who emphasize that this legislation aims to coordinate the regulatory responsibilities between the Securities and Exchange Commission ( SEC ) and the Commodity Futures Trading Commission ( CFTC ). The chairman of the Financial Services Committee stated that the draft further develops on the groundwork laid earlier, aiming to protect consumers and maintain the United States' leadership in the field of digital innovation.

This legislation proposes definitions for several core concepts, including digital goods, blockchain systems, decentralized governance, approved payment stablecoins, and mature blockchain systems. Notably, the draft explicitly states that distributions made through mining, staking, or user rewards do not constitute securities and do not constitute sales.

The draft sets out a registration pathway for digital commodity exchanges, brokers, and dealers under CFTC oversight, while allowing the SEC to retain jurisdiction over securities and certain hybrid assets. Entities engaging in custody, trade facilitation, or interaction with customers must adhere to newly defined registration and disclosure procedures.

The bill also protects decentralized finance ( DeFi ) protocols and self-custody wallets. As long as DeFi trading protocols and messaging systems do not hold user funds or exercise discretion, they are not required to comply with traditional financial regulations. Additionally, the draft prohibits restrictions on individuals' ability to self-custody encryption assets through wallets.

To advance the legislative process, the committee plans to hold a joint hearing on May 6, with the theme "The Future of American Innovation and Digital Assets: A Blueprint for the 21st Century." This hearing aims to initiate formal legislative discussions and gather opinions from all parties.

The draft also includes provisions regarding the joint formulation of rules by the SEC and CFTC, as well as content for conducting research on DeFi, NFTs, and blockchain infrastructure by expanding the functions of the innovation offices of federal agencies.

Overall, the proposed legislation aims to eliminate the uncertainty surrounding the regulation of encryption assets in the United States by establishing legal definitions and clarifying jurisdictional boundaries, while encouraging the responsible development and regulation of the digital asset market. This initiative could have a profound impact on the encryption asset industry in the United States and globally.