Amid ongoing legal battles between the U.S. Securities and Exchange Commission (SEC) and several cryptocurrency organizations, a bipartisan effort led by majority whip Tom Emmer and representative Darren Soto has re-introduced the Securities Clarity Act.
The act, initially presented in 2020, aims to demarcate a clear line between commodities and securities, thereby refining regulatory legislation concerning digital assets.
Emmer asserts that the current law’s lack of distinction between an asset and the securities contract it may be part of, compromises American innovation.
The new legislation, if enacted, will regard an “asset sold pursuant to an investment contract, whether tangible or intangible (including an asset in digital form),” as not a security following its sale or transfer.
This will separate the “investment contract asset” from the securities offering it was initially part of, rendering the definition “technology neutral.”
The act has been proposed amidst a legal standoff between Coinbase, a prominent cryptocurrency exchange, and the SEC.
Earlier this year, the SEC served Coinbase with a Wells notice, essentially an alert for potential forthcoming action. In response, Coinbase has legally challenged the SEC for regulatory clarity.
The ongoing court proceedings recently compelled the SEC to reply to Coinbase’s claims.
This week, the SEC addressed Coinbase’s appeal for significant regulatory changes, acknowledging the need for deliberation and the potential initiation of a rulemaking proceeding to address such matters.
This acknowledgment reveals the SEC’s recognition of the potentially significant impact on crypto assets and the broader securities market.
Meanwhile, in an ongoing case between the SEC and Ripple, another major player in the cryptocurrency arena, a court ordered the SEC to unseal the ‘Hinman docs.’ These documents, including drafts and emails related to a speech by William Hinman over four years ago, could potentially sway the case in Ripple’s favor.
Hinman, in his speech, maintained that the SEC did not view ETH as a security at that time. Ripple hopes to leverage this to understand why the SEC now categorizes XRP, its own cryptocurrency, as a security.
The bipartisan Securities Clarity Act, therefore, comes at a pivotal moment, aiming to provide much-needed clarity in the rapidly evolving field of digital assets and their intersection with securities law.