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House of Pay’n – House Passes Bill to Help Create Legal Framework for Digital Asset Regulation

On Tuesday, April 20, 2021, the House of Representatives passed the Eliminate Barriers to Innovation Act of 2021 (the “Act”). The Act was initially introduced in March with an overarching aim to clarify the roles of the Commodity Futures Trading Commission (“CFTC”) and the Securities and Exchange Commission (“SEC”) in the policing of cryptocurrencies in the U.S., and create collaboration between the two agencies. If passed in the Senate, the Act would require the CFTC and the SEC to jointly establish a digital asset working group (the “Working Group”) within 90 days of enactment.  This is landmark legislation as it is the first time either branch of Congress has passed a blockchain-related bill.  If passed, the Act could help provide some much-needed clarity in determining which regulators have jurisdiction over different digital asset issuers. 

The Working Group’s directive would be to submit, within one year, a report that contains an analysis of the current CFTC and SEC legal and regulatory framework for digital assets, the impact a lack of clarity has had on primary and secondary markets in the U.S., and the country’s competitive standing in comparison to developments in other countries. The report would also be required to include recommendations addressing the following:

  • Creation, maintenance, and improvement of primary and secondary markets in digital assets;

  • Legal treatment of custody, private key management, cybersecurity, and business continuity relating to digital asset intermediaries; and

  • Future best practices to reduce fraud and manipulation of digital assets, improve protection of investors, and assist in compliance with banking and anti-money laundering laws and regulations.

The Working Group’s composition would be comprised of an equal number of employees and non-governmental representatives appointed by the SEC and CFTC. The non-governmental representatives in the Working Group would be required to include at least one representative from each of the following sectors:

  • FinTech companies providing digital assets products or services;

  • Financial firms under the jurisdiction of the SEC or the CFTC;

  • Institutions or organizations engaged in academic research or advocacy relating to digital asset use;

  • Small businesses engaged in FinTech; and

  • Investor protection organizations - Institutions and organizations that support investment in historically-underserved businesses (women-owned, minority-owned, and rural businesses).

The full text of the Act can be found here.

© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume XI, Number 117
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About this Author

Daniel L. McAvoy Shareholder Investment Funds Securities & Corporate Finance Mergers, Acquisitions and Divestitures Corporate and Transactional Joint Ventures and Strategic Alliances
Shareholder

Dan McAvoy focuses his practice on private closed-end investment funds, corporate finance and M&A with a focus on private investment fund transactions, including complex GP-led restructurings and secondary transactions. Dan is a trusted adviser to numerous investment advisers, fund sponsors and investors, and has represented a range of companies, from startups to Fortune 500 companies. Dan has also represented portfolio companies and sponsors through all parts of the corporate life cycle, including formation, venture financings, add-ons, stock sales, asset sales, private and...

212-413-2844
Peter Waltz, Polsinelli Law Firm, Denver, Corporate and Finance Law Attorney
Counsel

Peter Waltz is dedicated to helping clients achieve their objectives by employing a comprehensive, interdisciplinary approach to their legal and business challenges. He advises companies in all phases of the business cycle and provides ongoing advice and counsel on day-to-day operational, business, and legal issues. This focus includes the preparation and negotiation of documents related to entity selection and formation, corporate structure, corporate governance, and commercial contract matters. Peter advises a variety of clients with their business transactions,...

303-583-8254
Kimberly N. Simmons Corporate Finance Attorney Polsinelli Washington, D.C.
Associate

Kim Simmons diligently seeks to find practical solutions to complex corporate financial transactions. She works with seasoned Polsinelli attorneys to analyze each transaction matter to develop a strategic approach to representation based on the client’s immediate and long-term business and operational goals. Kim helps deliver a range of legal services during the life cycle of the client’s business—from selecting the appropriate choice of entity through an exit strategy.

Kim previously served as a Polsinelli summer associate in the Washington, D.C. office.

202-626-8395
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