The Most Promising Crypto Bill Gets Drafted

As readers of CoinSnacks likely already know, crypto regulation in the US is currently non-existent. Nobody knows what stablecoins are legal, whether cryptocurrencies are securities or commodities, or the process of becoming a licensed exchange.

Unfortunately, there is no easy fix for regulation, as most bills aren’t very good and don’t gain much traction.

But that doesn’t mean some members of Congress aren’t still trying. And the newest proposed bill from House Financial Services Chair Patrick McHenry (R-NC) and House Agricultural Chair Glenn Thompson (R-PA) is perhaps the most promising offering yet.

Market Structure Clarity

The bill primarily focuses on how crypto fits into existing US financial law. In other words, it seeks to answer the question of whether crypto is a commodity, and thus under the purview of the CFTC, or a security, and thus under the thumb of Gary Gensler at the SEC.

But, even then, it’s not totally black and white.

Each token will be treated as a separate entity, and any regulated crypto firm dealing with the token can make a case that it is a commodity by proving that it is sufficiently decentralized, meaning:

• No one person had control for a year prior

• No single entity owns more than 20% of the token supply

• No marketing or issuance for the project was done in the last three months

• Token issuances in the last twelve months have to be to end users (you and me, not insiders)

This would obviously be a huge step forward from the current system of SEC Chair Gensler unilaterally choosing which cryptos classify as securities.

Alternative Trading Systems

In addition to answering crypto’s market structure question, the bill also creates a new crypto institution: the Alternative Trading System (ATS).

An ATS would simply be an SEC-registered crypto-exchange, and these platforms would have the ability to handle trading in commodities and stablecoins.

Considering that registering with the SEC is currently an impossible task (just ask Coinbase), this would be a welcome sight for any law-abiding crypto trading platform.

Not A Done Deal

The bill is off to a strong start, but it’s still a ways off from the finish line:

• Democrats had no part in drafting it

• Every other crypto bill that has come before it has died a slow death

So, until proven otherwise, we have to assume that this bill will also meet its demise somewhere in the legislative process. But we’re definitely hoping it makes it through.