financialservices.house.gov

Cmte Financial Services (R)
Contact:


McHenry Introduces Legislation to Provide Legal Clarity & Certainty for Digital Asset Projects
New Bill Provides a “Safe Harbor” for Digital Token Innovation

Washington, Oct 5 -

Today, the top Republican on the House Financial Services Committee, Patrick McHenry (NC-10), introduced the Clarity for Digital Tokens Act of 2021. This legislation ensures our regulatory framework embraces new technology and innovation by providing a “safe harbor” for startup digital asset projects, while maintaining important investor protections. By doing so, this bill will provide much-needed legal clarity and certainty for this rapidly growing industry.

“The U.S. should be a global leader, not a global follower, when it comes to digital assets,” said Republican Leader McHenry. “Unfortunately, our current regulatory framework threatens to push this technology—and the jobs created by this rapidly growing industry—overseas. My bill, which builds on the great work of SEC Commissioner Hester Peirce, will help provide the necessary legal certainty to digital asset projects when they launch. The Clarity for Digital Tokens Act is a pivotal first step toward embracing innovation and technology here at home, rather than playing catch-up to our competitors.”

“The Blockchain Association is proud to support Rep. Patrick McHenry’s (R-NC) Safe Harbor legislation to provide a legal landscape for innovators in the cryptocurrency space,” said Kristin Smith, Executive Director, the Blockchain Association. “This sound legislation, based on SEC Commissioner Hester Peirce's Safe Harbor 2.0, seeks to clarify the opaque U.S. securities laws as they apply to cryptocurrencies. This regulatory uncertainty has been stifling innovation for years and thereby resulting in an exodus of innovators from the U.S. to jurisdictions with a clear regulatory framework. We commend Rep. McHenry’s efforts to change this sentiment and make a clear safe harbor process for innovators to work with regulators to build the future of finance and protect consumers.”

“It is welcome news to see the formal codification of Commissioner Peirce’s Safe Harbor Proposal,” said Michelle Bond, CEO, Association for Digital Asset Markets (ADAM). “This regulatory framework provides developers the regulatory certainty to allow this new and developing market to grow domestically, while still providing necessary consumer protections. I applaud Commissioner Peirce and Ranking Member McHenry for their thoughtful and visionary collaborative work, which has ADAM’s full support.”

“A safe harbor for fledgling decentralized networks would be an elegant solution to the catch-22 U.S. innovators find themselves in today,” said Jerry Brito, Executive Director, Coin Center. “By adapting the law to account for the new realities of these technologies, we can give innovators confidence to experiment and grow in the United States while preserving regulators' ability to pursue bad actors.”

“The Chamber of Digital Commerce applauds Ranking Member Patrick McHenry for his leadership in introducing today’s legislative proposal that provides a safe harbor framework for blockchain innovators creating and issuing digital tokens as they develop their networks toward a decentralized or functional technology platform,” said Perianne Boring, Founder and President, Chamber of Digital Commerce. “This legislation has the potential to provide a much needed clear path forward for those creating new innovations and solutions leveraging digital tokens.”

Background:

Why is the Clarity for Digital Tokens Act necessary?

• The SEC’s Framework for “Investment Contract” Analysis of Digital Assets from two years ago has led to a number of unanswered questions and uncertainty.
• To quote Commissioner Peirce, “the complexity of this guidance and resulting public confusion motivated [her] to suggest a safe harbor” to address uncertainty of the application of the securities laws to tokens.
• Given Securities and Exchange Commission (SEC) Chairman Gensler’s approach to using enforcement actions as the mechanism to guide market participants, the ever-looming fear of violating the securities laws is very real, and the lack of clarity is apparent. 

What does the Clarity for Digital Tokens Act do?

• The Clarity for Digital Tokens Act of 2021 establishes a novel regulatory sandbox concept initially proposed by SEC Commissioner Hester Peirce.
• This bill will provide network developers with a “safe harbor” within which they can facilitate participation while allowing the development of a functional or decentralized network, under certain conditions, that is exempted from the registration provisions of the federal securities laws.
• The bill will allow entrepreneurs seeking to build decentralized networks in which a token serves as a means of exchange or provides access to a function of the network to get the tokens into the hands of other people.
• Simultaneously, this bill ensures that the transactions are conducted in a safe and responsible manner.

###