U.S. Rep. Patrick McHenry (R-NC) is sponsoring legislation that seeks to ensure that the U.S. regulatory framework provides a “safe harbor” for startup digital asset projects, while maintaining important investor protections.
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McHenry’s Clarity for Digital Tokens Act of 2021, H.R. 5496, seeks to provide network developers with a safe harbor within which they can facilitate participation while allowing the development of a functional or decentralized network, under certain conditions, that is exempted from the registration provisions of the federal securities laws.
McHenry, the top Republican on the House Financial Services Committee, said the bill will allow entrepreneurs seeking to build decentralized networks in which a token serves as a means of exchange or provides access to a function of the network to get the tokens into the hands of other people. Further, the bill ensures that the transactions are conducted in a safe and responsible manner.
“The U.S. should be a global leader, not a global follower, when it comes to digital assets,” McHenry said. “Unfortunately, our current regulatory framework threatens to push this technology – and the jobs created by this rapidly growing industry – overseas. My bill, which builds on the great work of SEC Commissioner Hester Peirce, will help provide the necessary legal certainty to digital asset projects when they launch. The Clarity for Digital Tokens Act is a pivotal first step toward embracing innovation and technology here at home, rather than playing catch-up to our competitors.”
The bill has the support of several industry groups, including the Blockchain Association.
“This sound legislation, based on SEC Commissioner Hester Peirce’s Safe Harbor 2.0, seeks to clarify the opaque U.S. securities laws as they apply to cryptocurrencies,” Kristin Smith, executive director at the Blockchain Association, said. “This regulatory uncertainty has been stifling innovation for years and thereby resulting in an exodus of innovators from the U.S. to jurisdictions with a clear regulatory framework.”
The Association for Digital Asset Markets (ADAM), Coin Center, and the Chamber of Digital Commerce also back McHenry’s bill.
“It is welcome news to see the formal codification of Commissioner Peirce’s Safe Harbor Proposal,” Michelle Bond, CEO, Association for Digital Asset Markets (ADAM), said. “This regulatory framework provides developers the regulatory certainty to allow this new and developing market to grow domestically, while still providing necessary consumer protections.”