Beyer introduces new legislation to regulate digital assets
Congressman Don Beyer (D-VA-08) has introduced the Digital Asset Market Structure and Investor Protection Act, legislation that would protect consumers and promote innovation by incorporating digital assets into existing financial regulatory structures.
“Innovation in the digital asset sector is creating new goods and services every day as well as many new, high-quality jobs. The United States should provide a legal and regulatory environment which promotes this type of innovation and growth,” said Rep. Beyer. “Digital assets and blockchain technology hold great promise, and it is clear that assets like Bitcoin and Ether are here to stay. Unfortunately, the current digital asset market structure and regulatory framework is ambiguous and dangerous for investors and consumers. Digital asset holders have been subjected to rampant fraud, theft, and market manipulation for years, yet Congress has hitherto ignored the entreaties of industry experts and federal regulators to create a comprehensive legal framework. Our laws are behind the times, and my bill would start the long overdue process of updating them to give digital asset holders and investors basic protections.”
Since the introduction of Bitcoin in late 2008 digital assets have evolved from technological curiosities into financial instruments used by millions of ordinary Americans. Today there are over 11,000 separate digital asset tokens in existence, with a market capitalization of over $1.5 trillion. An estimated 20-46 million Americans own Bitcoin and other digital assets, and that number is expected to grow. Many of these digital asset market participants, who are primarily average Americans rather than large institutional investors, have been victims of theft during trading platform hacks, or been exposed to significant market manipulation or frauds such as ponzi schemes.
Digital assets have also been widely used for money laundering and other illicit purposes. For instance, in May 2021, the Colonial Pipeline, which provides gasoline to much of the eastern United States, had its computer system hacked and was forced to pay a $4.4 million ransom in Bitcoin, which is the preferred currency for ransomware attacks.
Despite the rapidly growing importance of Bitcoin and other digital assets in our economy, no comprehensive legal framework exists to regulate the digital asset market or protect market participants. The Digital Asset Market Structure and Investor Protection Act of 2021 would promote innovation and US jobs by providing legal and regulatory certainty for digital assets, provide fundamental investor protections to U.S. retail investors and other consumers, improve trade reporting and transparency, strengthen the Bank Secrecy Act requirements related to the treatment of digital assets, and protect U.S. investors in the digital asset sector.
Specifically, the bill would:
- Create statutory definitions for digital assets and digital asset securities and provide the Securities and Exchange Commission (SEC) with authority over digital asset securities and the Commodity Futures Trading Commission (CFTC) with authority over digital assets;
- Provide legal certainty as to the regulatory status for the top 90% of the digital asset market (by market capitalization and trading volume) through a joint SEC/CFTC rulemaking.
- Require digital asset transactions that are not recorded on the publicly distributed ledger to be reported to a registered Digital Asset Trade Repository within 24 hours to minimize the potential for fraud and promote transparency;
- Explicitly add digital assets and digital asset securities to the statutory definition of “monetary instruments,” under the Bank Secrecy Act (BSA), formalizing the regulatory requirements for digital assets and digital asset securities to comply with anti-money laundering, recordkeeping, and reporting requirements;
- Provide the Federal Reserve with explicit authority to issue a digital version of the U.S. Dollar, clarify that digital assets, digital asset securities and fiat based stablecoins are not U.S. legal tender, and provide the U.S. Treasury Secretary with authority to permit or prohibit US Dollar and other fiat-based stablecoins;
- Direct the Federal Deposit Insurance Corporation (FDIC), National Credit Union Administration (NCUA), and Securities Investor Protection Corporation (SIPC) to issue consumer advisories on “non coverage” of digital assets or digital asset securities to ensure that consumers are aware that they are not insured or protected in the same way as bank deposits or securities; and,
- Require legislative recommendations from FinCEN, SEC and CFTC to provide clarity on dividing lines between who must register as a money services business versus who must register as a securities or commodities exchange.
Text of the Digital Asset Market Structure and Investor Protection Act is available here.