House Republicans unveils discussion draft for federal regulation of digital assets

U.S. Reps. Patrick McHenry (R-NC), Glenn “GT” Thompson (R-PA), French Hill (R-AR), and Dusty Johnson (R-SD) on June 2 released a 162-page discussion draft that provides a statutory framework for digital asset regulation in the United States.

Reps. McHenry and Thompson said the discussion draft is the product of an unprecedented joint effort between the U.S. House Financial Services Committee and the U.S. House Agriculture Committee that would provide for joint rulemakings between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC).

“For months, our committees have worked collaboratively to establish a viable regulatory framework for digital assets necessary to protect consumers and promote American innovation,” said Rep. Thompson, chairman of the House Agriculture Committee. “This historic joint effort with the House Committee on Financial Services aims to close existing authority gaps between the CFTC and SEC and bolster U.S. leadership in financial and technological innovation.”

“This discussion draft is the first step toward delivering on Republicans’ commitment to develop clear rules of the road for the digital asset ecosystem,” said Rep. McHenry, chairman of the House Financial Services Committee. “Our goal is to strike the appropriate balance between consumer protection and encouraging responsible innovation. I encourage stakeholders and market participants to provide constructive feedback to help us improve our legislation.”

The aim of the proposed bill would be to provide a statutory framework for digital asset regulation intended to provide clarity, fill regulatory gaps, and foster innovation, while providing adequate consumer protections, the lawmakers said in a statement.

“Legislation from Congress is needed to protect U.S. consumers and investors, as well as to preserve America’s role as a global leader in finance, technology, and innovation,” said Rep. Hill, chairman of the U.S. House Financial Services Subcommittee on Digital Assets, Financial Technology and Inclusion. 

The discussion draft represents a common approach to digital asset regulation that would bring existing consumer and investor protections to digital asset-related activities and intermediaries under the principle of ‘same risk, same regulation,’ Rep. Hill said. “We look forward to public feedback on this discussion draft,” he added.

Rep. Johnson, chairman of the U.S. House Agriculture Subcommittee on Commodity Markets, Digital Assets, and Rural Development, pointed out that a lot of confusion exists around digital assets.

“Our bill establishes a functional framework to fill the gaps in the regulatory process between the CFTC and the SEC,” said Rep. Johnson. “This is not only beneficial for digital asset firms, but for consumers and digital asset owners.”

The comprehensive discussion draft includes titles on definitions; rulemakings; digital asset exemptions; registrations for digital asset intermediaries at both the CFTC and the SEC; and innovation and technology improvements, among others, according to the text.

Sections within the titles include provisions related to requirements to transact in certain digital assets; enhanced disclosure requirements; the treatment of digital commodities and other digital assets; anti-fraud authority over payment stablecoins; modernized customer protection and recordkeeping requirements; jurisdiction over digital commodity transactions; and qualified digital commodity custodians, among several others.