On Friday, Liz pulled together a highlight reel of SEC actions on crypto since January — showing the agency’s concerted effort to act quickly on this topic. Commissioner Peirce also spoke on crypto at least twice last week — in a speech and on Bloomberg’s Trillions Podcast. But Congress has plans of its own and has also been making moves. The latest is the release by members of the House Financial Services Committee and Agriculture Committee of a discussion draft of a bill that would generally shift oversight of digital assets from the SEC to the CFTC — a long-standing wish of the industry. This Eversheds Sutherland alert explains how:

Specifically, the draft bill would amend the definition of “security” in the Securities Act of 1933 and the Securities Exchange Act of 1934 to expressly exclude “digital commodities.” To fall within the digital commodity definition, digital assets must come from “mature blockchain systems” – open-source, decentralized, fully automated networks – with no single entity owning more than 20% of the token supply.

The draft bill further proposes that secondary market trading of digital commodities, under specific conditions, would not be subject to SEC oversight. These exemptions for secondary transactions would not apply if the transactions involved purchasing an interest in the revenues, profits or assets of the issuer – more akin to equity or institutional offerings.

As written, the draft bill appears to exempt from SEC regulation the issuance and secondary trading of many of crypto’s most popular tokens, such as Ethereum, Solana, BNB, and Cardano, all seemingly meeting the definition of “digital commodity.” The draft bill sets forth procedures for how digital commodity exchanges would register with and be regulated by the CFTC.

Suffice it to say, the regulatory landscape for digital assets is rapidly shifting and changes are coming from all sides — keeping up with the developments is a full-time job. Latham recently released a “US Crypto Policy Tracker” – check it out for the current state of executive order, legislative, regulatory and industry group developments!

– Meredith Ervine