This is a segment from the Forward Guidance newsletter. To read full editions, subscribe.
Recent developments in Congress and comments from senators indicate that a market structure bill won’t be as easy to pass as the GENIUS Act.
Clarity on CLARITY?
Before Fed Chair Jerome Powell takes the Jackson Hole spotlight Friday, other bigwigs in the same valley gave us some regulatory tidbits to chew on.
US Sen. Tim Scott and SEC Chair Paul Atkins shared the type of praise for Donald Trump you’d expect from a Republican leader and an agency head nominated by the president. Making the US “the crypto capital of the world,” yada yada yada.
But between the lines, there were some more substantial soundbites.
For example, Scott — chair of the Senate Banking Committee — addressed market structure legislation. Perhaps you remember Scott, Cynthia Lummis and others introducing a “discussion draft” last month that built upon the CLARITY Act passed by the House.
It looks to define “ancillary assets” in a bid to clarify which digital assets are not securities, and it directs the SEC to “tailor existing requirements to digital asset activity.”
Eighteen Democrats voted for the GENIUS Act. Scott said he thinks he’ll have between 12 and 18 Dems at least open to voting for a market structure bill.
But it’s “a far more complicated piece of legislation,” he acknowledged, and someone like Sen. Elizabeth Warren standing in the way of Democrats wanting to participate is, in his words, “a real force to overcome.”
Patrick Daugherty, head of the blockchain and digital assets practice at law firm Foley & Lardner, agreed that this legislative effort is no sure thing. He also emphasized the difference between what the House passed and what the Senate Banking Committee revealed.
The CLARITY Act would help layer-1 blockchain builders, for example, raise capital more efficiently and protect them from failing to register with the SEC, the lawyer told me. Crypto exchanges would also be safer from attack for trading unregistered tokens.
Side note: To the contrary, it seems crypto project leaders may have to fend off overly friendly commissioners wanting to get coffee near their hometowns.
This CLARITY legislation would give both the SEC and CFTC jurisdiction over certain parts of the industry — with regulation around this technology able to shift from one agency to the other, Daugherty added.
Scott’s proposal puts more of the rule-making and regulation burden on the SEC. It’s worth noting, though, that the Senate Agriculture Committee — with oversight of the CFTC — is expected to soon introduce its own draft language focused on digital commodities.
“More than the stablecoin statute, either market structure statute, if enacted, will require considerable rulemaking and interpretation by the SEC and the securities bar who are following developments closely,” Daugherty said. “Will CLARITY clarify the law? Yes, but less than some would like.”
Atkins doubles down on ‘super-app’ approach
Atkins hammered home some of his “Project Crypto” priorities in a discussion later that morning — with some relating to the regulatory jurisdictions mentioned above. If you forgot the gist of the SEC chair’s broad plans:
Atkins had also noted, in the July 31 remarks, that he would help the Senate craft a market structure bill “that future proofs our markets against regulatory mischief.”
He then said Tuesday: “I didn’t come to Washington to engage in a turf battle,”
He doubled down on themes of being flexible as the marketplace and technology evolves, as well as implementing a so-called super-app approach.
“Five or 10 years from now, things will be completely different I’m sure,” Atkins said. “And we can’t put things into little cement-surrounded pockets that are immutable.”
Friendly competition and a balance of power is key, he noted — in part to guard against one regulator becoming “too obstinate.”
Related is the super-app piece. Atkins is talking about (as elaborated on a few weeks ago), letting securities intermediaries offer a bunch of products and services “under one roof with a single license.”
Republicans previously aimed to advance market structure legislation by Sept. 30, and Scott reiterated on Tuesday the urgency of getting this done: “Executive action is not enough. Period.”
Between future-proofing this bill and getting enough bipartisan support, it seems this tall task could take longer than some hope.
Get the news in your inbox. Explore Blockworks newsletters:
Source: https://blockworks.co/news/market-structure-bill-complicated
