A new proposal will provide cryptocurrency exchanges with a safe haven to list tokens that may be securities.
The draft legislation, by Senate Banking Committee Member Bill Haggerty (R-TN), would complement other proposals for a regulatory sandbox aimed at allowing blockchain and crypto developers to experiment with building tokens that might be securities.
It would create a two-year safe haven for exchanges that list tokens at the point where the Securities and Exchange Commission (SEC) considers unregistered securities, to me The Block, which saw an advance version of the bill released soon. The exchanges will also not face legal action for failing to register as brokers, dealers or exchanges for national security during that period.
It is not a theoretical problem. The SEC is said to be investigating the largest US crypto exchange Coinbase for listing unregistered securities — something that came to light when the SEC and the Department of Justice filed insider trading complaints against a former Coinbase manager.
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Haggerty’s bill would effectively cover all exchanges, and SEC President Gary Gensler has repeatedly said that nearly every cryptocurrency other than Bitcoin is a security. Although he didn’t say it explicitly, this likely includes the number 2 cryptocurrency, the Ethereum smart contract platform, on which the majority of decentralized applications and blockchain software are built.
Commodity Futures Trading Commission (CFTC) Chairman Rustin Behnam said that Ethereum – and possibly other tokens – is not a security because its primary use and value is to conduct transactions rather than speculate. This means, in industry terminology, that ether is a utility token rather than a security token.
The Hagerty bill would not prevent the Securities and Exchange Commission from subpoenaing the securities or launching enforcement actions against its developers, but it would give the CFTC the ability to object. Coin issuers will also be able to sue to block the SEC’s action, as cross-border payments company Ripple is doing.
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Hagiri’s bill would essentially complement other proposals to create such temporary exemptions for cryptocurrency developers, making it easier for them to sell tokens issued in their safe haven. Among these commissioners is Hester Pearce for 2020 suggestion A three-year safe haven would allow blockchain developers time to build their projects to the point where they would no longer qualify as securities.
See more: CFTC Chief: Crypto and DeFi Have Bypassed the Sandbox
This has seen strong support from some members of Congress who want to make it easier for digital asset developers to innovate.
Among them is Patrick McHenry (RN. .
He said last year that Pierce’s bill “will allow entrepreneurs seeking to build decentralized networks where the token serves as a medium of exchange or provides access to one of the network’s functions to pass the tokens into the hands of other people.”
The point of Senator Haggery’s bill is that it will be difficult if exchanges are afraid to sell those tokens.
Two other legal bills that would influence Senate crypto regulation proposals: Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand’s (D-NY) Responsible Financial Innovation Act, and another from the Senate Agriculture Committee that would give both a body Commodity futures trading (CFTC) has more power over cryptocurrencies.
Related: Crypto Fight on Capitol Hill Increasingly Preferring CFTC
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