Interpretation of the 4 main points of the digital asset bill that may be introduced before the 24-year presidential election in the United States

A bill on digital currencies could be introduced before the November 2024 U.S. presidential election. The draft, which does not yet have an official title, but could be called the Digital Asset Market Structure Act, covers a number of key issues.

Getting that done before the presidential election is crucial because it is getting harder to pass legislation as the party draws closer. Two years ago, there was no clear distinction between Democrats and Republicans on issues such as digital assets and bitcoin, and it was unclear which party was specifically for or against. However, in the past one or two years, the Republican Party has increasingly supported the development of digital assets, while the Democratic Party, under the leadership of Elizabeth Warren and the chairman of the SEC, has opposed the development of digital assets.

On June 6, the day when the SEC sued Coinbase, the chairman of the SEC stated in front of the media that the United States does not need more digital currencies because there is already a US dollar digital currency. This is the first time he has expressed his views so clearly, and his statements have been more reserved before. At best, only Bitcoin will be accepted, and neither other stablecoins nor Ethereum need to exist, he said. The US dollar is always number one in the world. The draft of the Digital Asset Market Structure Act was completed at the end of May, and the hearing held on June 6 was to discuss the draft and listen to many opinions.

What was discussed at the hearing?

There is a seasoned member of the House of Representatives—Bernie Sanders, who has been in politics for more than 40 years. He is 84 years old this year. He has long fought for the interests of low-income groups and is highly respected. Despite his dislike for digital assets, he still believes that the United States needs a bill on digital assets to prevent incidents like FTX from happening again. He was worried that the draft would be biased towards CFTC and might reduce the SEC's power, so he wrote a letter to the chairman of the SEC, inquiring about the impact of the draft on the regulatory scope and suggestions for the draft. At the same time, he also wrote a letter to U.S. Treasury Secretary Yellen, asking about the impact of the draft on the stability of the U.S. financial system and whether it conflicts with the policies of the U.S. Treasury Department and the Financial Stability Oversight Board.

The letter was sent last Friday and a response is expected on Friday. However, both the SEC chairman and Yellen are very busy. The draft has 162 pages, and it is difficult for them to give a detailed reply in a short time. The emergency comes as lawmakers are taking a few days off for the Fourth of July holiday. The chairman of the financial services committee hopes to get an internal vote to pass the draft before the full House votes on the second Monday in July. The two lawmakers who drafted the bill are trying to win the support of more than half of the House of Representatives.

The House of Representatives has a Republican majority, and the bill is likely to pass. In the Democratic-controlled Senate, however, the situation is more complicated. Two senators who support the development of digital assets have temporarily put their proposals on hold, and instead fully supported the bill drafted by the House of Representatives. They need to win more support in the Senate, which will drag on until next year.

**After the House passes the draft, the Senate reviews and amends it. Then, the Senate and House of Representatives would agree on a final version, which would be sent to the president for his signature. The bill does not become law until the president signs it. This process could last for several months, possibly even extending to the 2024 US presidential election. **

Let's take a look at the main content of the draft:

The draft is divided into four parts

First, various important definitions, SEC and CFTC should work together to formulate rules and a temporary registration system.

• Includes the definition of blockchain,
• Definition of blockchain network
• Definition of blockchain protocol
• Definition of decentralized network
• Definition of Decentralized Institution
• Definition of digital assets
• Definition of digital asset issuer
• Definition of Digital Asset Maturity Day
• Definition of digital commodities
• Definition of end-user decentralization
• Definition of functional blockchain network
• Definition of payment stable currency

2. Exemption of digital assets

The definition of exemption for digital assets: it refers to a digital asset. If it can meet several conditions, it will not be subject to the current securities law. There are many contents in it, and they are abbreviated into 4 articles.

• The total amount of digital assets sold by the issuer in the past 12 months does not exceed 75 million US dollars, and no more.
• Non-qualified investors refer to people with low income and assets. The digital assets they bought in the past 12 months should be less than an amount, not too much, because there are risks, and this amount is within the two values. Take 5% of the annual income of the larger purchaser and 5% of the total assets, that is to say, the digital assets purchased in the past 12 months should be smaller than the larger of these two numbers.
• This digital asset held by a certain buyer cannot exceed 10% of the total amount. If there is too much, there will be a risk of centralization. Not too much, not more than 10%
• Not trading stocks or bonds

If these four conditions are met, and the issuer and the intermediary agency report to the China Securities Regulatory Commission on time as stipulated in the draft, after passing, then this digital asset is considered exempted, so the supervision is relatively loose, and the issuer A buffer period, enough time to develop a project. However, a new disclosure mechanism has also been established, which is specially used by digital asset issuers to tell the issuers what information they need to prepare for the public to see.

In addition, the issuer believes that its project is sufficiently decentralized, so it can apply to the China Securities Regulatory Commission for decentralized certification. With decentralized certification, it is easier to be recognized as a commodity. To explain, decentralized certification is not the only condition, but it is the most important one. Another condition is that the blockchain network is a functional network, which refers to the function of value storage and community governance, rather than the agreement between the issuer and the holder, saying how much money I earn and share dividends with you.

3. How to register digital asset intermediaries with SEC and CTFC.

** How various digital asset intermediaries register with the China Securities Regulatory Commission has a lot of content, the first of which is the most important that payment stablecoins and commodity digital assets do not need to do so. There are many kinds of stablecoins, like usdc, its function is for payment, and it is not regulated by the China Securities Regulatory Commission. **

How various digital asset intermediaries register with the CFTC, here gives the CFTC new jurisdiction, allowing digital commodities to be regulated by the CFTC. The spot market for commodities such as gold is unregulated. You Go to the store with me to buy two gold bars, no one cares about it, and gold derivatives, such as futures contracts and options contracts, are regulated by the CFTC, digital commodities such as Bitcoin and Ethereum The spot market is currently unregulated, and the draft plan is to be supervised by the CFTC. In this way, many trading platforms, such as Coinbase, must register with both the CFTC and the SEC.

4. Both SEC and CFTC will set up new branches to support technological innovation

There are a lot of important contents in each item, the main content is that the SEC will establish an innovative financial technology strategy center, which will be reported to the SEC every year, and the CFTC will establish a CFTC laboratory as CFTC’s information on financial technology innovation The source, which is also a forum for innovators to better understand regulators, is filed annually with the CFTC. The SEC and CFTC will also jointly establish a digital asset advisory committee, which will provide advice to the SEC and CFTC, which is equivalent to a think tank.

Generally speaking, I like this draft. He can explain things clearly and give the CFTC the supervision power of the spot market of digital commodities, so that the CSRC can take less care of some things. Of course, we need to listen to the suggestions of all parties, what the chairman of the China Securities Regulatory Commission has to say, and what suggestions Yellen has. It will take a long time for the two parties to negotiate, compromise, and revise the draft. We can also expect that in the next few months, digital assets will spark more debates on the American political arena. Politicians will be watching public opinion closely to make informed decisions on digital currency bills. This means that the fate of digital assets in the future will largely depend on the views and attitudes of American voters.

But we will eventually have formal laws. AIying will also continue to pay attention to the latest developments and update in time when more information is received.