When Representative Don Beyer introduced the new Digital Asset Market Structure and Investor Protection Act at the end of July, it took many in the crypto world by surprise.
At 58 pages, the "Digital Asset Market Structure and Investor Protection Act" is a uniquely comprehensive approach to an issue that has been vexing regulators and legislators more and more recently.
Beyer, after all, had not produced any crypto-focused legislation before, nor had he been especially vocal about the industry. This led to speculation by some that it was a push from other government agencies, particularly the Treasury Department.
Not the case, says the Beyer team. "We started working on this bill over a year ago. Rep. Emmer’s suggestion that this came from Treasury is inaccurate," a spokesperson told The Block, saying:
"The dramatic expansion of the digital asset marketplace and the relatively piecemeal approach Congress has taken to regulating the market so far provided much of the impetus to develop the comprehensive proposal we introduced last week."
There's no question the bill is timely. The controversial appearance in the Senate infrastructure bill of provisions to increase IRS reporting requirements for crypto network participants resulted in a surge of public visibility, particularly of the industry's presence in Washington, DC.
Wednesday morning, the public learned of the latest in the exchange between Gary Gensler, chairman of the Securities and Exchange Commission, and Senator Elizabeth Warren on crypto regulation. At the beginning of July, Warren had asked Gensler what sort of congressional authorization the SEC would need to do more in the crypto markets. Gensler's response today included many of the areas that Beyer's bill addresses.
"There is a broad recognition that Congress needs to step in a more comprehensive way and major regulation of the digital asset market. We view our proposal as the start of that conversation," Beyer's spokesperson said. "Our bill responds to comments from regulators, particularly from SEC Chairman Gary Gensler, asking Congress to weigh in and provide the necessary legal clarity."
During this same timeframe, Beyer and Warren have been working together to close up tax loopholes.
Indeed, much of what the bill does is authorize regulators to, for example, decide which cryptocurrencies are commodities or securities — in the language of the bill, "digital assets" and "digital asset securities," respectively. The bill even has a provision for digital asset securities seeking to become digital assets, à la the SAFT framework, or SEC Commissioner Hester Peirce's proposed safe harbor. It also requests an inter-agency report on regulating decentralized finance.
Many of its provisions are familiar. Voluntary federal registration with the Commodity Future Trading Commission, for example, showed up in a bill introduced by Michael Conaway. In April, a bill sponsored by Patrick McHenry and Stephen Lynch in the Financial Services Committee to coordinate the SEC and CFTC on digital assets was passed on to the Senate. This is not to mention the many attempts to classify various assets as securities or not, most notably Warren Davidson's Token Taxonomy Act.
The Beyer bill addresses many of these same issues but in a more comprehensive fashion, and involves allocating authority directly to regulators, especially the SEC and CFTC.
Pat McCarty, formerly of the CFTC and SEC and currently an adjunct professor at Georgetown Law, was involved in drafting the bill's language. McCarty did not respond to The Block's request for comment.
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