CRS - overview of HR 4763, a proposal to regulation crypto assets in the United States.
August 16, 2023
The House Committee on Financial Services on July 26, 2023, and the House Committee on Agriculture on July 27, 2023, ordered to be reported to the House H.R. 4763 (Financial Innovation and Technology for the 21st Century Act). If enacted, it would introduce significant changes to the way digital assets are regulated. Currently, there is no overarching digital-asset-specific federal regulatory framework.
Depending on the specific circumstances, various existing laws and regulations may apply, including those administered by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). Some policymakers believe existing laws and regulations sufficiently accommodate digital assets, while others believe additional authorities are required or that the regulatory framework otherwise needs to be reformed.
Decentralization and Digital Commodities Framework One aspect of digital asset regulation that often generates uncertainty in the industry is whether a
particular digital asset, given its individual features, should be regulated as a security by the SEC, as a commodity by the CFTC, or both. H.R. 4763 aims to resolve this uncertainty by creating specific classification criteria explicitly subjecting digital assets to a particular set of regulations and by establishing new regulatory requirements based on how a digital asset is classified.
H.R. 4763 would classify a digital asset as a commodity, regulated by the CFTC, if the blockchain (digital ledger) on which it runs is certified as decentralized. The bill would define decentralized network as, among other things, one in which no one person or entity has “unilateral authority” to control the operation of or access to the blockchain. The proposal would provide parallel permissions for individuals and firms to certify with the SEC or the CFTC that digital assets they plan to list meet the decentralized criteria. The proposal would provide the SEC and CFTC authority to reject such certifications with cause within a specific time frame. Digital assets that run on blockchains that are not decentralized would, depending on certain characteristics, be classified as securities.