New US Crypto Market Bill Is Both Boon and Bane for Small Crypto Firms

New US Crypto Market Bill Is Both Boon and Bane for Small Crypto Firms – See How

The BrandTalk editorial team has accessed the US Crypto Market Bill rigorously. Check our analysis of the critical Impacts of the Bill.

The new US Crypto Market Structure Bill has landed like a bombshell in the crypto industry.

While it redefines the jurisdictional boundaries between the SEC and the CFTC, its primary goal is to simplify crypto regulation nationwide. Still in draft form, it will be formally unveiled today at a joint hearing of the House Financial Services and Agriculture Committees.

If approved, the bill could profoundly reshape the entire crypto landscape. This BrandTalk article examines its key provisions and explores how they will affect both small and large crypto firms.

Provisions of the Bill Important for Crypto Firms

The BrandTalk editorial team has accessed the draft of the bill rigorously. It has come to the conclusion that these provisions of the bill are the ones that are going to significantly impact the nascent or budding projects in web3.

Before analysing their critical impact, it is important to know what they are. These are:

1. The Bill defines the countours of the SEC and CFTC jurisdiction very clearly. The CFTC is given exclusive authority over digital commodities and and their spot markets. These assets must run on decentralized and functional blockchain systems.

Meanwhile, SEC oversight is subjected to the assets running on blockchains that are functional but not sufficiently decentralized and treated as securities.

2. Section 203 grants a temporary exemption from Securities Act registration for capital-raising sales of digital commodities. This means if you’re issuing a new token that’s intended to be a “digital commodity”, you can raise money by selling that token without instantly having to register it as a security with the SEC.

However, issuers must meet certain maturity, disclosure and technical conditions.

3. Section 204 of the bill imposes quarterly caps on sales by founders/affiliates who wish to sell digital commodities associated with their blockchain projects. It requires pre- and post-sale disclosures to the SEC, with rulemaking authority for further reporting obligations.

4. Section 205 establishes a process for a blockchain to be formally certified as “mature,” triggering transition from exempt status to full regulatory treatment.

5. In a positive development, accredited investor and wealth barriers are being removed by the bill. The bill by eliminating income/net-worth thresholds opens token offerings and exchanges opportunities to all retail participants without traditional accredited-investor checks.

How the Bill Will Impact Crypto Startups

In essence, the US crypto market structure bill from Secs 201–206 grants a temporary exemption for on-chain token sales of “mature” digital commodities.

This means that nascent projects can raise funds without immediate full SEC registration. This would give new crypto projects a runway to build product-market fit before shouldering the expense of a securities filing.

The Bill is particularly positive for decentralised applications (dApps) of DeFi. Its SEC (Title III) and CFTC (Title IV) dramatically lowers legal barriers for pure-play DeFi dApps.

Thus, it is good for dApps because the US Crypto Market Bill exempts non-custodial, permissionless protocols that don’t exercise discretionary control over user funds from intermediary registration at both the regulatory bodies.

Adding to Insider Holding Disclosures, it has also relaxed 5% threshold mentioned in previous bill of 2021, FIT21. It now requires any individual or entity holding >1% of a token’s total supply to publicly report their position.

According to Justin Slaughter, Paradigm Regulatory Affairs Vice-President, “This is a portent of the entire bill” and can curb the dominance of big crypto firms.

Further, as mentioned above, the bill eliminates accredited-investor and wealth thresholds for token offerings. This will open the door to a much larger user base – critical for small firms relying on community growth rather than deep-pocketed VCs.

Challenging Provisions that Can Prove as Bane

Besides the positive provisions, there are certain challenges too of the US Crypto Market Bill.

Section 203 demands continuous filings on code changes, token-economic shifts, insider transactions, and governance updates for both issuers and major token holders. Small teams may find these quarterly or even monthly obligations distracting from core development.

To qualify for “digital commodity” status and its attendant benefits, projects must undergo a formal certification process according to the bill.

This would require hiring technical auditors and legal counsel to prove a network’s decentralization which can be challenging for small crypto firms. Defending against potential SEC challenges would add time, cost, and uncertainty to the budding projects.

The two-year transition pressure can also be quite challenging. Firms that can’t secure enough funding or legal bandwidth in that window can be forced to wind down certain services.

Thus, crypto firms would be require to act fact in a limited time period. The US Crypto Market Bill in conclusion has both the positive and negative provisions for the crypto firms operating in the web3.

Wth the significance and impact of the bill in front of us, crypto firms and founders/CXOs will be closely eyeing the discussion of the bill slated for today.

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