Senate's Cryptocurrency Bill Adopts Distinct Strategies Opposed to CLARITY Act
The Senate has introduced a landmark bill, the Responsible Financial Innovation Act (RFI Act), which aims to establish a clear and modern regulatory framework for digital assets. The bill, sponsored by Senator Cynthia Lummis, seeks to create distinctions between digital asset securities and commodities, positioning the United States as a global leader in digital asset innovation.
Under the RFI Act, the Securities and Exchange Commission (SEC) will take on a significant role in regulating digital assets. Certain digital assets classified as securities and permitted payment stablecoins will fall under the SEC's jurisdiction, while other digital commodities will remain under the Commodity Futures Trading Commission (CFTC).
The SEC's responsibilities include overseeing permitted payment stablecoins issued by approved U.S. entities under the GENIUS Act framework. These stablecoins can be traded or custodied by brokers, dealers, national securities exchanges, or alternative trading systems (ATS) registered with the SEC. The SEC's role also includes protecting against fraud, manipulation, and insider trading in connection with these stablecoins.
The legislation clearly distinguishes between digital asset securities (regulated by the SEC) and digital asset commodities (regulated by the CFTC). Entities may be dually registered with both the SEC and CFTC when dealing with asset classes under both agencies’ purviews. The SEC must issue rules to prevent duplicative or conflicting regulatory burdens on such entities.
The RFI Act expands the SEC's mission to include innovation and efficiency. The bill authorises banks to engage in digital asset activities like custody, lending, market-making, and operating blockchain nodes. The bill also introduces a new Regulation DA exemption for token offerings and empowers the SEC to create a rule defining an investment contract, potentially replacing the "Howey Test".
The bill does not alter the existing exemptions for most cryptocurrencies from securities laws. It also does not mention any changes to the proposed "Micro-Innovation Sandbox" or the SEC's Crypto Task Force, led by Commissioner Hester Peirce, which has made significant strides in recent months.
The bill's focus on the SEC's role in digital asset regulation does not change its stated aim of establishing clear distinctions between digital asset securities and commodities, modernizing the regulatory framework, and positioning the United States as the global leader in digital asset innovation.
The Senate Banking Committee has published a discussion draft of the RFI Act regarding crypto market infrastructure. The bill's passage and subsequent implementation could bring clarity, modernization, and increased investor protection to the digital asset market, while facilitating innovation within clearly delineated boundaries.
[1] Senate Banking Committee. (2021). Discussion Draft: Responsible Financial Innovation Act. Retrieved from https://www.banking.senate.gov/imo/media/doc/RFI%20Act%20Discussion%20Draft.pdf
[2] Lummis, C., & Gillibrand, K. (2021). The Responsible Financial Innovation Act. Retrieved from https://www.lummis.senate.gov/sites/default/files/2021-10/RFIA_Factsheet.pdf
[3] CoinDesk. (2021). Senate Banking Committee Unveils Bipartisan Crypto Bill. Retrieved from https://www.coindesk.com/policy/2021/10/14/senate-banking-committee-unveils-bipartisan-crypto-bill/
- The Responsible Financial Innovation Act (RFI Act) seeks to create a clear and modern regulatory framework for digital assets, focusing particularly on digital asset securities and permitted payment stablecoins, which will fall under the Securities and Exchange Commission's (SEC) jurisdiction.
- The SEC's responsibilities include overseeing permitted payment stablecoins issued by approved U.S. entities and protecting against fraud, manipulation, and insider trading in connection with these stablecoins.
- The RFI Act expands the SEC's mission to include innovation and efficiency,authorising banks to engage in digital asset activities like custody, lending, market-making, and operating blockchain nodes.
- The bill does not alter the existing exemptions for most cryptocurrencies from securities laws, yet it introduces a new Regulation DA exemption for token offerings and empowers the SEC to create a rule defining an investment contract.
- The Senate Banking Committee's publication of a discussion draft of the RFI Act regarding crypto market infrastructure could bring clarity, modernization, and increased investor protection to the digital asset market, while facilitating innovation within clearly delineated boundaries. [Source 1, Source 2, Source 3]
