Senator Bill Hagerty’s Digital Asset Clarity Act of 2022 aims to determine when a digital asset is a security and when it may be something else.
As was reported earlier this month, the legislation strives to provide digital asset exchanges with a safe harbor from some SEC enforcement actions without “sacrificing consumer protection.”
Recently, the text of the legislation was finally posted on Congress.gov.
Currently, the Securities and Exchange Commission (SEC) believes that all digital assets are securities – perhaps with the exception of Bitcoin and maybe Ethereum (but this may have changed following the Merge).
Senator Hagerty is attempting to broaden digital assets beyond being only securities and thus regulated by the Commission.
As the language stands now, it may be downloaded here.
In brief, the legislation appears to pump the brakes on enforcement actions initiated by the SEC targeting crypto exchanges without a determinative process.
To quote the legislation:
Any digital asset with respect to which a determination has not been made under subsection (d), and that is listed through an intermediary that has satisfied the requirements de10 scribed in subsection (c), shall not be considered to be a security.
And, under Subsection C:
The intermediary shall establish a process for listing digital assets through the intermediary, which shall be reasonably designed to permit the intermediary to determine whether the digital asset is a security. The process established under paragraph (1) shall include written policies and procedures to conduct and document an accurate classification of the applicable digital asset for the purposes of the securities laws, which shall be supported by materials that include legal analysis performed by attorneys with expertise in the securities laws, which shall take into consideration—
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- relevant Commission rules, enforcement actions, no-action letters, and exemptive orders and other relevant guidance provided by 12 the Commission or the staff of the Commission;
- (B) relevant guidance from, or formal action taken by, other Federal agencies, including the Commodity Futures Trading Commission; and
- (C) relevant case law.
The legislation has been referred to the Senate Committee on Banking and will probably be parked until after the midterms.
Senator Hagerty previously stated:
“This legislation is an important step toward providing digital asset intermediaries with much-needed certainty and removing the barriers to entry currently impeding the growth and liquidity of U.S. cryptocurrency markets.”