Republicans Crypto Bill to Define SEC and CFTC Roles

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Patrick McHenry, RN.C., and Glenn Thompson, R-Pa. introduced a bill that proposes a clearer delineation of powers between the SEC and the CFTC on crypto matters. It would provide a pathway to registration and explicitly allow crypto securities to be traded on alternative trading systems, both of which fall under the jurisdiction of the SEC. The CFTC oversees the market for spot crypto products under applicable law.

Representative Patrick McHenry, a Republican from North Carolina and a senior member of the House Financial Services Committee, speaks during a hearing in Washington, D.C.

Andre Harrer | Bloomberg | Getty Images

Republican lawmakers released a bill on Friday that would provide crypto-assets and exchanges with a clearer regulatory blueprint, allowing digital assets to be traded on more conventional trading platforms and introducing a division of powers between the two major US financial regulators.

The draft discussion was co-authored by Reps. Patrick McHenry, RN.C., and Glenn Thompson, R-Pa., and would grant the Commodity Futures Trading Commission explicit spot market authority over crypto commodities in under existing law.

The Securities and Exchange Commission would regulate digital asset securities.

The bill would “prohibit the SEC” from preventing an alternative trading system, or ATS, from listing crypto securities and require the SEC to “change its rules to allow brokers to custody digital assets,” according to a draft. summary.

The bill provides a clearer path for the registered offering and sale of digital assets. The SEC has founded several enforcement actions against U.S. crypto entities, including Gemini, Genesis, and Kraken, arguing that the companies engaged in the unregistered offering and sale of securities.

A key exclusion for so-called DeFi assets, or decentralized financial assets, would allow SEC-certified assets to be exempt from registration as securities.

Crypto exchanges have called for regulatory clarity following sweeping enforcement actions that have left companies and developers scrambling to move operations beyond US crypto exchanges. Coinbase and Gemini both announced offshore exchange operations.

Coinbase is also embroiled in a deadly court battle with the SEC over the very issues that apparently prompted the McHenry-Thompson bill. The crypto exchange received a Wells Notice, a warning of impending enforcement action, from the SEC earlier this year.

The bill will likely be reshaped and amended in the weeks and months to come, but it represents a powerful vote of support from two influential Republican members.

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