U.S. Reps. Tom Emmer (R-MN) and Darren Soto (D-FL) are sponsoring legislation designed to bring regulatory clarity to the digital asset ecosystem.
Currently, securities laws do not distinguish between an asset and the securities contract it may or may not be a part of. This presents challenges as many cryptocurrencies may initially be issued as part of a securities contract. However, once the project is fully developed and decentralized, it could fall under a different classification, such as a commodity.
Without a distinction between the asset and the securities contract, projects that must raise capital to fund their development will not be able to move out of the securities framework once the project becomes decentralized. This would prevent these tokens from being used for their utility.
Emmer and Soto’s bill, The Securities Clarity Act (H.R. 23650), creates a distinction between an asset and the securities contract it may or may not be a part of.
“Until we have a clear definition of what is a commodity and what is a security, American innovation will continue to suffer. Entrepreneurs need clarity to calculate risk accurately, create new investment opportunities and grow our economy. Our legislation will help provide these answers and allow American investors to fully participate in digital asset technology without sacrificing consumer protections,” Emmer said.
Specifically, the bill clarifies that any asset sold as the object of an investment contract, now defined as an “investment contract asset,” is distinct from the securities offering it was originally a part of. This definition is technology-neutral and applies to all assets sold or offered that would only be considered a “security” because of their inclusion in an investment contract.
“Blockchain technology helps boost our nation’s economy by allowing innovation to grow. With the Securities Clarity Act, Congress is working to protect those who invest in this technology. This bill will add critical definition and jurisdiction to create certainty for a strong digital asset market in the United States—an important step in maximizing the potential of virtual currencies for the U.S. economy while protecting customers and the financial well-being of investors,” Soto said.
The legislation is endorsed by the Coin Center, the Blockchain Association, the Chamber of Digital Commerce, and the Crypto Council for Innovation.
“The digital asset industry needs clear rules of the road so that companies can offer products that consumers want while maintaining consumer protections. Blockchain Association thanks Representatives Emmer and Soto for their continued work to do just that. The Securities Clarity Act aims to provide regulatory clarity for the securities treatment of digital assets and we are proud to support its reintroduction,” Kristin Smith, CEO of the Blockchain Association, said.
The bill was approved by the House in the last Congress, but failed to advance.