Earlier this month, draft legislation was introduced by Congress to work towards a regulatory structure for digital assets. Last week, the North American Securities Administrators Association (NASAA) sent a letter to two House committees telling Congress they did not support the proposed rules.
While most everyone accepts the fact that all securities will be digital at some point in the future and certain digital assets may be commodities, NFTs, and perhaps have utility, yesterday’s rules did not conceive of the digital future. Congress, led by the House Financial Services Committee, as well as the House Committee on Agriculture, is trying to do something about it.
NASAA, the entity that represents all of the state securities regulators, has outlined its opposition to the draft legislation. In brief, NASAA points to the following bullet points as to why they do not support the bill.
- The Well-Established Securities Regulatory Framework in the United States Applies to All Products That Are Securities
- NASAA Strongly Urges Congress to Foster Innovation by Funding and Requiring Enhanced Regulatory Coordination.
- NASAA Strongly Opposes Laws That Would Weaken Investor Protection and Preempt State Efforts to Promote Responsible Capital Formation.
NASAA, while voicing support for innovation in capital markets, the claim comes across as hollow. NASAA has a checkered past when it comes to updating securities law. In fact, NASAA was one of the most vocal organizations when it came to opposing securities crowdfunding – calling it a top investor threat. The organization sought to undermine Reg A+ and its pre-emption of state blue sky laws, supporting a lawsuit to get the rules overturned. While NASAA plays an important role in battling fraud, at times, the organization appears to be more concerned about turf than enabling innovation and taking a more holistic and empowering approach. There is little in the letter that indicates a willingness to work with the authors of the legislation.
The House has introduced the digital asset legislation to garner feedback from interested parties, including state securities regulators. The letter from NASAA seems to take a stance that any change is unacceptable – unless it provides more power to state regulators.