Washington, D.C.— U.S. Senator Cynthia Lummis (R-WY) joined Senate Banking Chairman Tim Scott (R-SC) in releasing principles to guide the Committee’s consideration of market structure legislation.
“America desperately needs digital asset legislation that promotes responsible innovation and protects consumers,” said Lummis. “While the European Union and Singapore have established clear regulations, the U.S. continues to sit on the sidelines while the digital asset industry seeks greener pastures. That changes today. I am partnering with Chairman Scott to provide principles for market structure legislation to finally draw the line between a security and a commodity and ensure the U.S. remains at the helm of global financial advancement.”
“Since taking over as Chairman, I’ve led a new approach to digital assets regulation, and we’ve delivered results for the industry and the American people,” said Scott. “We have more work to do, and I look forward to building on the success of the GENIUS Act and advancing market structure legislation here in the Senate. These principles will serve as an important baseline for negotiations on this bill, and I’m hopeful my colleagues will put politics aside and provide long-overdue clarity for digital asset regulation.”
The market structure principles state:
Legislation Should Clearly Define the Legal Status of Digital Assets
- A clear, economically rational line distinguishing digital asset securities from digital asset commodities should be fixed in statute, contemplating existing law and providing predictability, enhanced legal precision, and much-needed regulatory certainty.
Jurisdiction Should Be Clearly Allocated Among Regulators
- The authority of the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) should be clearly allocated in statute, preventing either from emerging as an all-encompassing regulator.
- The SEC’s authority should extend to, for example, initial fundraising transactions, disclosures and transactions in tokenized securities; and
- The CFTC should be granted new spot authority focused on market conduct, which should not extend to digital assets that are securities.
- Legislation should acknowledge that not all distributed ledger technology should be regulated by the SEC and CFTC.
- Legislation should recognize the different risks and benefits between centralized firms, decentralized finance protocols, and non-custodial software platforms.
- For similar reasons, self-custody of digital assets should be explicitly preserved.
- Likewise, the use of distributed ledger technology and smart contracts for other, non-financial purposes, such as to manage health data, should fall outside the jurisdiction of the SEC and CFTC.
SEC and CFTC Regulation Should be Modernized to Foster Innovation
- Federal securities and commodities laws should be modernized to account for the unique nature of digital assets and distributed ledger technology.
- A new SEC exemption for certain digital asset fundraising should be included in legislation.
- The SEC should revisit its burdensome registration requirements for digital asset issuers, and instead provide a clear, appropriately tailored pathway to compliance for good faith, innovative actors.
- Clear, pro-innovation principles regarding the trading of digital assets on the secondary market should be established.
- These principles should consider whether digital asset securities may be traded alongside digital asset commodities, and whether traditional securities or commodities should be traded alongside digital asset securities or commodities, respectively.
- Legislation, as well as SEC and CFTC rules, should not apply principles designed for centralized firms to decentralized protocols.
- Tokenization should be recognized as an evolution of financial infrastructure that enhances efficiency, transparency, and liquidity, rather than a fundamental change to the nature of the underlying asset.
Regulation Should Protect Those Who Purchase or Trade Digital Assets
- Centralized digital asset intermediaries should be subject to innovation-friendly registration and risk management requirements similar to that of other centralized intermediaries today.
- Requirements could include illicit finance compliance, clear and right-sized capital, custody and segregation requirements, and appropriate enforcement authority.
- Legislation should also ensure that customer funds are protected during bankruptcy.
Illicit Finance Measures Should Be Targeted and Pro-Innovation
- A small, common-sense package of measures directed at preventing money laundering and sanctions evasion with digital assets should be included.
- Potential provisions can and should be targeted and pro-innovation. This could include requiring the adoption of examination standards and clarifying that the Bank Secrecy Act and International Emergency Economic Powers Act (IEEPA) extends to entities abroad with U.S. touchpoints.
- Reforms should also consider the ways digital assets and distributed ledger technology can improve transparency, efficiency, and the detection of illicit activity, including money laundering.
Federal Financial Regulators Should Welcome Responsible Innovation
- Federal financial regulators should take common-sense steps to respond to responsible innovation, including potentially through increased use of no-action guidance, sandboxes, safe harbors, coordination, and appropriate application requirements.
- Federal financial regulators should provide clear guidance affirming that many crypto-related activities are permissible for banks and other financial institutions, provided they do not threaten the safety and soundness of the institution.
- Clear guidance will also improve and better enforcement by establishing well-defined rules and expectations, fostering accountability, and enabling consistent application of regulations, leading to better understanding and compliance.
For complete market structure principles, click here.
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