by Owen Fernau
Congressional meeting follows key ruling in Ripple vs SEC
U.S. lawmakers will convene for a “markup” on July 26 to discuss two bills concerning digital assets and stablecoins.
Next week, the House Financial Services Committee and the House Committee on Agriculture will review and amend the Financial Innovation and Technology for the 21st Century Act.
The bill would provide guidance for determining whether a digital asset is a security, registration requirements for exchanges and brokers, and the establishment of a joint advisory commission. The latest version of the bill was published on July 20.
Lawmakers will also consider a bill introduced in February by Patrick McHenry, chairman of the Financial Services Committee, outlining regulatory recommendations for stablecoins and stablecoin issuers.
If approved, the bills will move to the U.S. House of Representatives.
Ripple Ruling Looms Large
The scheduled meeting will come less than two weeks after a U.S. court delivered an important ruling in the ongoing dispute between the Securities and Exchange Commission (SEC) and Ripple Inc., a DLT payments firm. On July 13, District Judge Analisa Torres denied most of the SEC’s claims against Ripple, with the regulator arguing that Ripple distributed nearly $1.4B worth of unregistered securities to investors between 2013 and 2020 in the form of its XRP token.
Miller Whitehouse-Levine, the CEO of web3 advocacy group, DeFi Education Fund, told The Defiant the congressional meeting is the next “big moment” for U.S. digital asset regulations following last week’s ruling in the dispute between the U.S. Securities and Exchange Commission (SEC) and Ripple.
Whitehouse-Levine commended the judge, Analisa Torres, for advancing that the 1946 Howey Test, a framework used to determine if assets are securities, does not effectively account for digital assets.
“What the judge said is a reaffirmation of the idea that an application of the Howey Test isn’t going to capture crypto tokens writ large,” he said.
McHenry said the court’s decision “underscores the need for Congress to provide clear rules of the road for the digital asset ecosystem” in a July 14 statement.
Sometimes a security, sometimes not
Andy Bromberg, the co-founder of Coinlist, a centralized exchange, told The Defiant said that the relationship between digital assets and securities should be treated like a “Venn diagram” rather than a binary assessment
“The thing [the Ripple] case brought into the public consciousness [is that] something can be a security sometimes and not other times,” Bromberg said. “You need to look at the analysis of an individual transaction to make a determination about that.”
Bill Hughes, director of global regulatory matters at Consensys, said the ruling poses a challenge to the SEC’s regulatory crusade against crypto by distinguishing digital assets from their method of distribution.
“These tokens themselves to be the regulated object… for the SEC to achieve its policy goals were,” Hughes said.
Orlando Cosme, a lawyer representing crypto firms, highlighted that many of the operations associated with decentralized organizations sit in gray areas of law, such as DAOs paying salaries in the form of native tokens.
“I’ve been talking in a lot of crypto legal circles about [how] when you really get into the weeds, things get weird,” Cosme said.