• The U.S. Congress is attempting to establish clear jurisdiction for the nation’s chief market regulators by introducing a new bill.
• Democrats are not supportive of this bill as they believe it is too friendly towards the crypto industry, similar to what disgraced FTX boss Sam Bankman-Fried had advocated for.
• House Financial Services Committee Chair Patrick McHenry believes that the new bill will clarify how the Supreme Court’s Howey Test applies to digital assets by focusing on “decentralization” and “functionality.”
Congressional Stablecoin Bill
The U.S. Congress has taken its first legislative step towards establishing clear jurisdiction for the nation’s chief market regulators by introducing a bill called the Financial Innovation and Technology for the 21st Century Act. House Financial Services Committee (HFSC) Chair Patrick McHenry (R-NC) believes that this bill will clarify how the Supreme Court’s Howey Test applies to digital assets, focusing on “decentralization” and “functionality.”
Democrats Reject Bill
However, most Democrats are not in favor of this move, as they find it too friendly towards the crypto industry, similar to what disgraced FTX boss Sam Bankman-Fried had advocated for. Rep Maxine Waters (D-CA) said that the bill is a “wish list” for crypto companies and disregards views from both the Biden Administration and Securities and Exchange Commission (SEC).
The Howey Test was introduced in 1946 by Supreme Court Justice Learned Hand in order to determine whether or not an investment contract constitutes a security under US law. It essentially states that an investment is considered a security if it involves investors putting their money into an enterprise with an expectation of profits from others’ efforts rather than their own work or investments in tangible property like land or buildings. This test has been used ever since then to determine whether certain cryptocurrencies should be classified as securities or not, which would then limit them from being used as investments without proper regulatory approval first.
Decentralization & Functionality
McHenry believes that this new act will help clarify how decentralization and functionality factors into determining whether or not a cryptocurrency should be classified as a security under US law with regards to Howey Test regulations. He also stated that decentralization would play an important role in deciding whether certain tokens should be treated differently than traditional securities, such as stocks or bonds, due to their limited control over their own value creation mechanisms unlike those traditional asset classes which rely heavily on centralized entities like banks or brokerages for value creation purposes.
Overall, although Republicans are hoping that this new legislation will provide clarity regarding which crypto assets fall under which type of regulatory framework; most Democrats are still skeptical about it due to its perceived leniency towards crypto companies when compared with other governing bodies such as SEC and Biden Administration’s views on digital assets regulation .