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House Committees Discuss Legislative Approach to Digital Assets Amid Financial Sector Turmoil

Committees Examine Regulatory Landscape and Investor Protections in the Rapidly Evolving Digital Asset Space

Thu, 11 May 2023, 10:40 am UTC

On Wednesday, the House Financial Services Committee and House Agriculture Committee convened a joint meeting to explore the most effective legislative approach to digital assets.

The meeting was prompted by the current lack of government oversight in the financial sector, which is experiencing a period of turbulence.

Key members, including Republican chairs and ranking Democrats from the committees and subcommittees, were in attendance, with Rep. Stephen Lynch (D-Mass.), the senior Democrat on the digital assets subcommittee, among them.

During the meeting, Lynch raised the question of whether Congress should be drafting a bill at all, expressing concerns that it might be seen as a lenient approach and potentially encourage other sectors to shift their financial products into the digital assets space.

He argued that establishing a separate regulatory framework through legislation is not the solution and emphasized that the Securities and Exchange Commission (SEC) already possesses sufficient authority to regulate the crypto industry.

Lynch's stance echoed that of SEC Chair Gary Gensler, who consistently maintains that current securities laws grant adequate authority to regulate the crypto industry.

Lynch pointed out that the industry, for the most part, has failed to comply with existing regulations, suggesting that the issue lies not in regulatory ambiguity but in widespread non-compliance.

However, Rep. French Hill (R-Ark.), chairman of the finance panel's digital assets subcommittee, suggested that the recent case against Binance by the Commodity Futures Trading Commission (CFTC) demonstrates the uncertainty faced by the CFTC and SEC in regulating the crypto space.

House Republicans published a draft resolution on the committee website outlining their current stance on crypto oversight. The resolution argues that the SEC's approach is flawed and that regulators should await guidance from Congress to establish tailored rules for digital assets, ensuring investors receive the same level of protection as in other sectors.

At the conclusion of the meeting, House Financial Services Committee Chair Patrick McHenry (R-N.C.) affirmed the committee's commitment to action, stating that a crypto market-structure bill will be introduced within the next two months.

While specific details of the forthcoming legislation were not provided by the Republicans, Rep. Hill asked an industry expert during the hearing about the feasibility of a crypto disclosure method proposed by SEC Commissioner Hester Peirce in 2021.

Marco Santori, chief legal officer of Kraken, expressed that the approach is "significantly more advanced than our current state in terms of safeguarding consumers and enabling us as a global business to continue planning investments here in the United States."

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