Bill Would Offer A Safe Harbor For Crypto Exchanges

A new proposal would provide cryptocurrency exchanges with a safe harbor to list tokens that could be securities.

A bill by Senate Banking Committee member Bill Haggerty (R-Tenn.) would complement other regulatory sandbox proposals intended to allow blockchain and cryptocurrency developers to experiment with building tokens which might otherwise be titles.

This would create a two-year safe harbor for exchanges that list tokens as they are deemed by the Securities and Exchange Commission (SEC) to be unregistered securities, according The Block, which saw an advance copy of the bill published shortly. Exchanges also could not face legal action for not registering as national security brokers or exchanges during this time.

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This is not a theoretical problem. The SEC is reportedly investigating major US crypto exchange Coinbase for listing unregistered securities – something that came to light when the SEC and the Department of Justice filed an insider trading complaint against a former Coinbase official.

SEE ALSO Cathie Woods’ Ark Jumps Ship as Coinbase’s SEC Woes Threaten Crypto Payments

Haggerty’s bill would effectively cover all exchanges, as SEC Chairman Gary Gensler has repeatedly stated that virtually all cryptocurrencies other than bitcoin are a security. Although he didn’t say so explicitly, this likely includes the #2 cryptocurrency, the Ethereum smart contract platform, on which the majority of decentralized apps and blockchain programs are built.

Commodity Futures Trading Commission (CFTC) Chairman Rostin Behnam has said that Ethereum – and possibly other tokens – is not a security because its primary use and value is to transact rather only to speculate. This means that, in industry terminology, ether is a utility token rather than a security token.

Haggerty’s bill would not prevent the SEC from calling token securities or initiating enforcement actions against their developers, but it would give the CFTC the ability to object. And coin issuers could also file a lawsuit to block SEC action, as cross-border payments firm Ripple is doing.

Read also: SEC Setback in Ripple Suit Adds Pressure to Define Crypto Assets

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Haggery’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 own safe harbor. Chief among them is SEC Commissioner Hester Peirce’s 2020 proposal for a three-year safe harbor that would give blockchain developers time to build their projects to the point that they would no longer qualify as securities.

See more : CFTC Chairman: Crypto and DeFi have moved beyond the sandbox

This has been strongly supported by some members of Congress who want to make it easier for digital asset developers to innovate.

These include Patrick McHenry (RN.C.), a senior minority member of the House Financial Services Committee, who has been extensively engaged on the subject, most recently working with the chair, Maxine Waters ( D-Calif.) on a bill to regulate stablecoins. .

Peirce’s bill, he said last year, “will allow entrepreneurs looking to build decentralized networks in which a token serves as a medium of exchange or provides access to a function of the network to put the tokens in the hands of other people”.

The point of Senator Haggery’s bill is that it would be difficult if exchanges feared to sell these tokens.

Two other bills that would impact this issue of Senate crypto regulatory proposals: the Responsible Financial Innovation Act by Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (D-NY), and a another coming out of the Senate Agriculture Committee that would both give the CFTC more authority over cryptocurrencies.

Related: Crypto Fight on Capitol Hill increasingly favors the CFTC

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Bill Would Offer A Safe Harbor For Crypto Exchanges

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