How the U.S. Government Regulates Crypto Could Come Down to Its Definition

SEC Chair Gary Gensler has been openly skeptical about crypto. In April, he said many of these tokens meet the definition of securities. He added that he has asked staff to work with the CFTC to address platforms “that might trade both crypto-based security tokens and some commodity tokens, using our respective authorities.”

To make the regulatory distinction more clear, the bill would need to fully define exactly what digital assets are, but it seems the legislation’s sponsors want to give the crypto companies themselves control of that process. According to the joint press release, the bill would try to create a standard for which digital assets are commodities and which are securities by “looking at the purpose of the product being issued and the rights it conveys the consumer, giving digital asset companies the ability to determine what their regulatory obligations will be.”

At the same time, the bill does introduce multiple stopgaps in the crypto industry, including requiring digital assets that “do not represent securities” to disclose their information with the SEC twice a year. The massive piece of legislation would also create advisory committees to update lawmakers on new technology and force the federal government to analyze the energy and environmental costs of bitcoin mining.

Consistent crypto critics like Ben McKenzie, the former star of The O.C. and Gotham, have pointed out that this bill would make crypto lobbyists happy, and he’s not totally wrong. Blockchain Association executive director Kristin Smith told The Washington Post that this “represents a milestone moment for crypto policy and a major step forward for the crypto industry in Washington.” Other major crypto investors called the bill “a significant and much-needed milestone for web3.”

Crypto lobbyists have put over $30 million into federal political campaigns this year, according to a May report by CNBC. Gizmodo has previously reported on the revolving door between federal regulators and the crypto industry. Some tech experts have recently asked politicians to ignore the hubbub and hype and instead take “a critical, skeptical approach” toward crypto. Now that the $1.2 trillion crypto industry is finally in the sights of lawmakers, it seems most are buying into the idea that blockchain technology represents an inevitable good.