In brief
- Representative Patrick McHenry (R-N.C.) has proposed new rules for digital tokens.
- If adopted, these new rules may allow crypto firms to dodge securities laws.
Representative Patrick McHenry (R-NC) has proposed the Clarity for Digital Tokens Act of 2021, which would provide legislative backing to SEC Commissioner Hester Pierce’s “safe harbor” approach to crypto.
This would create a pathway for crypto companies to launch their own token sales without having to worry about existing securities legislation at the federal level in the United States.
“My bill, which builds on the great work of SEC Commissioner Hester Pierce, will help provide the necessary legal certainty to digital asset projects when they launch,” McHenry said in a prepared statement.
“Unfortunately, our current regulatory framework threatens to push this technology—and the jobs created by the rapidly growing industry—overseas,” he said.
McHenry's bill, like Commissioner Peirce's Safe Harbor proposal, would give crypto startups up to three years to demonstrate "network maturity" and become decentralized to the point that their associated tokens no longer meet the definition of securities under federal law. The bill would also require these startups to provide certain disclosures to the purchasers of their tokens, such as the source code, transaction history, and "token economics."
McHenry today also wrote a letter to SEC Chair Gary Gensler which claimed that the SEC head has “made a series of concerning and apparently self-contradicting public statements regarding crypto assets and other innovative technologies.”
The bill is a breath of fresh air for those within the crypto industry who oppose strict regulation—and specifically the approach SEC Chair Gensler has taken with regard to crypto throughout much of this year.
SEC vs Crypto
When Gensler was nominated as chairman of the SEC, many within the crypto space speculated that he would be a friend to the industry, given the fact he has previously taught a course on blockchain technology and written an op-ed about how Bitcoin could be a “catalyst for change.”
So far, that optimism has not been justified.
What We’ve Learned About SEC Chairman Gary Gensler’s Stance on Crypto
SEC Chairman Gary Gensler talked crypto twice yesterday, once during an exclusive interview with CNBC, and again at an address before the Aspen Security Forum. Ever since Gensler was nominated by President Biden as Chair of the Securities and Exchange Commission (SEC) in February, speculation about his approach to crypto almost exclusively hinged on the fact he taught a blockchain course at MIT. Now, the crypto industry knows a lot more about Gensler’s view on crypto. 1.Crypto needs consumer p...
Instead, Gensler has adopted a far stricter line on crypto, suggesting on several occasions that the majority of crypto assets in circulation today could very well be unregistered securities.
What’s more, Gensler believes these assets may not only fall foul of U.S. securities legislation, but U.S. commerce and banking legislation too.
Gensler has also echoed calls for greater consumer protection made by other high profile political figures like Senator Elizabeth Warren (D-MA). Earlier this summer, Warren said the crypto industry needs “rules of the road” in order to protect small investors.
