US House Panel Passes the First Crypto Regulatory Framework Bill

On Wednesday, July 26, the US House panel approved the legislation by crypto advocates to set up clear regulatory rules in the country. In a 35-15 vote, the House Financial Services Committee approved the Republican-led bill with some Democrats also voting in favour of the bill.

Chairman Patrick McHenry of North Carolina praised the legislation as well as the potential for cryptocurrencies. “This is a software revolution and a financial revolution if done correctly,” he said. The Republicans had warned that without a clear regulatory bill, all crypto companies will be heading to overseas destinations. Last week, the Republicans introduced this landmark crypto bill by making a few changes after the XRP ruling.

Passing the initial step is a victory for crypto supporters who argue that current regulations lack clarity and are trying to hinder the U.S. Securities and Exchange Commission’s actions against the industry, especially after the failures of prominent companies like FTX.

The House Agriculture Committee, led by Pennsylvania Republican Glenn Thompson, will review its part of the bill on Thursday. This includes providing an extra $120 million to the Commodity Futures Trading Commission. Thus, the additional funding would grant the commission new authority to regulate the asset class as outlined in the legislation.

Crypto Regulatory Framework

The proposed law aims to set guidelines for crypto companies to register with the SEC or the CFTC. Also, it outlines a process for digital asset creators to prove to the SEC that their blockchain network is decentralized enough, so the CFTC can oversee related tokens as commodities. The bill also requires the two agencies to work together in creating rules and mandates studies on topics like nonfungible tokens and decentralized finance (DeFi).

Furthermore, the bill states that a digital asset should not automatically be considered a security just because it’s sold as part of an investment contract. This aligns with a recent court ruling in the SEC’s case against Ripple Labs Inc. Republicans hope this ruling will support their efforts to create new laws and show their Democratic colleagues the need for such legislation.

However, this legislation has faced pushback, even coming from SEC Chair Gary Gensler. The SEC Chair said that the existing rules are enough to decide if a token is a security or not. Thus, there’s no need for new rules as per Gary Gensler. Some of the other top Democrats have also criticized the bill.