Congressmen Task SEC and CFTC to “Eliminate Barriers” to Digital Asset Innovation through Joint Working Group of Stakeholders, Promoting Competitive Environment in the United States

By Amy Davine Kim, Chief Policy Officer, Chamber of Digital Commerce
March 8, 2021

As other countries continue to lead in the rapidly growing digital asset industry, now is the time for the United States to build and maintain clear and uniform regulatory framework across agencies to position this industry for success in the coming decades. Bipartisan legislation introduced yesterday by Ranking Member Patrick McHenry (R-NC) of the House Committee on Financial Services and co-sponsored by Congressman Stephen Lynch (D-MA), Chair of the House Financial Services Committee FinTech Task Force, Congressman Glenn Thompson (R-PA), Ranking Member of the House Committee on Agriculture, Congressman Ted Budd (R-NC), and Congressman Warren Davidson (R-OH) would promote that goal by formalizing a joint working group on digital assets between the U.S. Securities and Exchange Commission (SEC) and U.S. Commodity Futures Trading Commission (CFTC), the two leading agencies that oversee digital asset markets in the United States, as well as key industry groups.

The United States can no longer do nothing. For more than a decade, despite good intentions, the industry has operated in an opaque, fragmented, and confusing regulatory environment with respect to standards for custody, private key management, cyber security, business continuity, and registration and reporting requirements, to name a few.  In recent years, the SEC has viewed most digital assets exchanged or sold as a security while the CFTC has considered most to be a commodity – two different financial assets.  We need a solution that will take input from the experts across all stakeholders, in both industry and government, to forge meaningful recommendations of standards for adoption and regulation.

The SEC’s recent enforcement actions against blockchain companies for distributing digital tokens as unlicensed securities offerings plainly illustrates the serious and market-moving consequences of ongoing regulatory confusion and opacity. In other words, the industry needs more guidance specific to the unique characteristics of digital assets and their markets.

We are proud to support the Eliminate Barriers to Innovation Act of 2021 that requires the SEC and CFTC to form a “Working Group on Digital Assets” to convene key stakeholders, including industry representatives, for one year to work together to resolve regulatory issues surrounding digital assets, and to provide recommendations to relevant Congressional committees. This type of legislative concept – establishing a group of experts to consider the problems presented to them and make recommendations – is well-understood in Congress and has the ability to gain traction among Members from both sides of the aisle.

The working group would include equal representation from both organizations as well as at least one representative from a financial technology company, a financial services institution, an investor protection group, a small business or entrepreneur, an institution or organization supporting investment in historically-underserved businesses, and someone engaged in related academic research or advocacy.

Specifically, the legislation calls for the working group to deliver a report to SEC and CFTC leaders and relevant Congressional committees that contains recommendations to:

      • Improve the efficiency, transparency, availability and efficacy of primary and secondary markets in digital assets;
      • Support market integrity and improve customer protection; and
      • Establish protocols concerning custody, private key management, cybersecurity and business continuity relating to digital asset intermediaries.

Importantly, the legislation also requires the working group to deliver comprehensive analysis of developments in other countries relating to digital assets and how those trends impact the United States and our competitive position in this evolving industry.

Ranking Member McHenry and Congressman Lynch’s leadership have been instrumental in driving this urgent and ongoing dialogue forward.

Simply put, clear and uniform guidance from the SEC and CFTC is sorely needed if we are to remain competitive globally in the digital asset marketplace and remain innovation leaders. This legislation will help move the needle toward a framework for greater clarity and transparency with respect to how digital assets interplay between securities and commodities laws. We also believe this legislation will make the United States a much more attractive country to launch or grow any digital asset business.