Depending on the particular branch of the U.S. government one is talking to, cryptocurrency can be property (IRS), a security (SEC) or a commodity (CFTC). On April 20, 2021, the U.S. House of Representatives passed a bill aimed at remedying this situation. The bipartisan Eliminate Barriers to Innovation Act will establish a digital asset working group to ensure collaboration between regulators and the private sector to foster innovation.
The new law will require the SEC and CFTC to establish a working group on digital assets, which will consist of appointees from each agency as well as representatives from financial technology companies, financial firms, and small businesses, among others. The working group will produce a report within a year that will include an analysis of the domestic regulatory framework and the developments in other countries relating to digital assets. The report also requests insight into best practices to reduce fraud, protect investors, and assist in compliance with obligations under the Bank Secrecy Act.
Congressman Patrick McHenry, Republican leader of the House Financial Services Committee made clear that the objective was for Washington to keep up with the innovations in the fintech industry and provide more regulatory clarity. Congressman Stephen F. Lynch, Democratic Chair of the Financial Technologies Task Force delivered a similar message, saying: “As this technology continues to develop and deploy, it is extremely important that we consider the possible vulnerabilities that the wider adoption of digital assets might present while addressing the lack of clarity in the regulation of these financial instruments to mitigate potential harms that may occur. This bill will create critical collaboration between the S.E.C., the C.F.T.C. and Congress that will ultimately help create fair and transparent markets.”
At the same, the Token Taxonomy Act ( H.R. 1628) has been reintroduced and is currently pending before the House. The sponsor of this bill, Warren Davidson, has explained that the purpose of the bill is also to improve regulatory clarity. But it more directly confronts the SEC, which has applied the Howey test to determining if tokens qualify as securities, concluding in almost every case that it does. This bill specifically excludes digital tokens from the definition of a security and directs the SEC to enact certain regulatory changes relate thereto.