Benzinga - by Murtuza Merchant, Benzinga Staff Writer.
House Financial Services Committee Ranking Member Maxine Waters (D-Calif.) and House Agriculture Committee Ranking Member David Scott (D-Ga.) have expressed their strong opposition to a bill creating a definition for whether a digital asset is a security or a commodity.
What Happened: Quoting an email to Democratic members of the House of Representatives, Eleanor Mueller, economics reporter at Politico, reported that while the members oppose H.R. 4763, the Financial Innovation and Technology for the 21st Century Act (FIT21), they are not actively rallying their members to vote against it.
NEW: House Democratic leaders said today they will NOT whip against House Republicans' crypto bill, I'm told.The whip question sent to members this a.m. says that Waters and Scott "strongly oppose" the legislation, but does not urge them to vote "no": https://t.co/V3DSjewYzV pic.twitter.com/lORrUIo4RZ
— Eleanor Mueller (@Eleanor_Mueller) May 20, 2024
Waters and Scott argue that the bill undermines long-standing legal precedents and injects uncertainty into the traditional securities market.
“This language undermines decades of legal precedent and case law, thereby creating uncertainty in our traditional securities market,” they wrote in an email obtained by Politico.
The bill proposes a safe harbor provision where entities can file an “intent to register” if they meet specific requirements, effectively shielding them from existing securities laws and regulations until new rules are finalized by the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC).
This, they argue, would “weaken investor protections and open the door to fraud and market manipulation.”
In a “Dear Colleague” letter posted on the House Financial Services Committee’s Democrats page, Waters and Scott delve deeper into their opposition, referring to the bill as the “not fit for purpose act.”
They list several concerns, including that the bill would create a “pathway for ‘investment contract assets’ with no alternate regulator,” leaving them largely unregulated.
Also Read: Fidelity Files Amended S-1 for Spot Ether ETF With SEC
The legislation, if enacted, would prevent shareholders from suing publicly traded companies, preempt state regulations on digital assets, weaken fiduciary requirements, and undermine capital markets, according to the letter.
The email also urges lawmakers to vote against H.R. 192, a bill introduced by Majority Whip Tom Emmer (R-Minn.) aimed at blocking the Federal Reserve from issuing a central bank digital currency (CBDC).
They argue that the bill’s “overly broad definition” of CBDCs could undermine the Fed’s ability to conduct monetary policy.
Despite the opposition, FIT21 is supported by a coalition of digital asset organizations and companies, including Coinbase (NASDAQ:COIN), Kraken and Andreessen Horowitz.
Supporters argue that the bill provides a much-needed regulatory framework for the digital assets industry in the U.S., which currently lacks clear guidelines.
The bill aims to define whether a digital asset is a security or a commodity, expand the CFTC’s authority to register and regulate digital commodities, and require the CFTC and SEC to jointly issue rules for assets not otherwise classified.
What’s Next: The potential implications of these legislative developments will be a focal point at Benzinga’s Future of Digital Assets event on Nov.19, where industry leaders, investors, and policymakers will gather to discuss the evolving role of digital assets in the global financial landscape.
This event promises to provide valuable insights into how these regulatory decisions will shape the future of cryptocurrency investments.
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