Democrats Weigh Support For House Republican Crypto Bill, Here’s Why

House Democratic leaders unveiled their position on the House Republican crypto bill, revealing an unexpected strategy. Although Representatives Maxine Waters and David Scott voiced staunch opposition to the bill, they opted not to actively rally fellow lawmakers to vote against it. This move lays the groundwork for forthcoming parliamentary deliberations and voting scheduled for Wednesday, highlighting a crucial juncture in the legislative journey.

Impact of the Proposed Crypto Bill on Regulatory Norms

Traditionally, digital assets have fallen under the regulatory purview of the SEC as securities, assessed through the “Howey” test. This test defines an “investment contract” as an investment of money in a common enterprise with a reasonable expectation of profits. However, the newly proposed bill introduces language that challenges this precedent.

By categorizing digital assets sold as “investment contracts” as non-securities, the bill disrupts established legal norms, casting uncertainty over the traditional securities market. Furthermore, the bill establishes a process allowing digital commodities to be traded in secondary markets if they were initially offered as part of investment contract securities. This provision, along with the creation of a safe harbor for entities filing an “intent to register,” weakens investor protections and exposes markets to potential fraud and manipulation.

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Democratic Concerns and Ongoing Actions Regarding Cryptocurrency Regulation

Despite refraining from actively rallying against the bill, the sentiment among Democratic leaders remains skeptical. A whip question circulated among members emphasized Waters and Scott’s strong opposition without explicitly urging a “no” vote. Waters plans to meet with SEC officials to further discuss concerns, indicating ongoing efforts to address regulatory implications.

In a letter to colleagues, Waters and Scott cautioned against the potential consequences of relaxed regulation under the CFTC, highlighting the risk of lacking a primary regulator in certain areas. This proactive engagement underscores the Democrats’ commitment to ensuring robust oversight and protection within the evolving landscape of cryptocurrency regulation.

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