US Crypto Bill Draft Drops—Here’s What Wall Street Doesn’t Want You to Know

Six explosive takeaways from Washington’s latest attempt to tame the crypto wild west—while somehow letting banks off the hook (again).

1. The ’Not-So-Commodity’ Clause: Bitcoin and Ethereum get special treatment, leaving altcoins in regulatory purgatory.

2. Stablecoin Showdown: Tether’s nightmare scenario as USD-pegged tokens face Fed-grade scrutiny.

3. DeFi’s Existential Threat: That ’decentralized’ protocol? Might need to register like a traditional exchange.

4. The 800-Pound Custodian Rule: Your cold wallet could suddenly be ’unqualified’ under new asset-holding standards.

5. Institutional Green Light: BlackRock’s lobbyists pop champagne as crypto ETFs get baked into law.

6. The Compliance Tax: Projects now face seven-figure legal bills just to avoid becoming SEC target practice.

Buried in subsection D-42? A sneaky provision letting JPMorgan custody crypto while Main Street investors jump through KYC hoops. Some things never change.

Proposed Legislation Seeks Clarity On Crypto Transactions

This proposed legislation indicates that if an individual buys or sells digital commodities on the secondary market—rather than directly from the issuer—the transaction will not automatically trigger US securities laws unless it confers some form of ownership or claim on the company’s profits or assets. This distinction is crucial for fostering a more favorable environment for crypto trading and investment.

The draft bill outlines several critical amendments to existing laws, particularly the Securities Investor Protection Act of 1970. Notably, it defines “investment contracts” in a manner that excludes certain digital commodities from being classified as securities. 

This means that secondary market transactions involving crypto assets may not be subject to the stringent regulations typically applied to securities under various acts, including the Securities Act of 1933 and the Investment Advisers Act of 1940.

VanEck’s Matthew Sigel Highlights Key Changes 

Matthew Sigel, head of digital asset research at asset management firm VanEck, summarized the implications of the draft bill by highlighting several key points. 

One major change is the removal of income and wealth limits for retail buyers, which opens the market to a broader audience. Additionally, the bill eliminates the need for accredited investor checks, simplifying access to investment opportunities in crypto assets

Another important aspect of the draft is the introduction of a clear decentralization test, which requires that no single entity has unilateral control over a digital commodity. Projects that do not meet this criterion will face scrutiny, as holders of more than 10% of the project must be disclosed while it remains centralized. 

The bill also provides exemptions for decentralized finance (DeFi) protocols, as long as they are non-custodial and do not exercise discretion over user funds.

Moreover, the draft defines stablecoins without categorizing them as securities, providing much-needed clarity for these increasingly popular digital assets. 

It also outlines an optional early registration path for issuers and emphasizes the need for joint rulemaking between the SEC and the Commodity Futures Trading Commission (CFTC), further signaling a collaborative approach to crypto regulation.

Featured image from DALL-E, chart from TradingView.com