Republican Introduces Bill To Establish Safe Harbor For Digital Tokens, Seeks Clarity From SEC On Crypto Regulation

On Tuesday, the leading Republican on House Financial Services Committee, Rep. Patrick McHenry of North Carolina, introduced the Clarity for Digital Tokens Act of 2021. 

Essentially, this bill would adapt the 1933 Securities Act, establishing a three-year safe harbor for token development startups.

It would offer those tokens for sale without complete registration as a securities offering with the condition that the network decentralizes over those three years. 

As per the bill, token issuers would have to make disclosure requirements specific to the industry, including source code, development plans and information explaining the launch and supply process. 

SEC commissioner Hester Peirce first proposed the safe harbor. Then, following the coin offering boom of 2017-2018, the SEC strode up its scrutiny of token issuance with the hope that issuers will register their offerings with the commission.

Earlier in the day, McHenry released a letter to the SEC Chairman Gary Gensler asking for a timeline on the SEC's role in regulating crypto exchanges and Stablecoins, which he describes as "concerning and apparently self-contradicting."

His letter comes just before the committee's oversight hearing of the SEC, during which several committee members are expected to ask Gensler about crypto regulation.

Tuesday's hearing is the first oversight hearing focused solely on the SEC. 

Gensler has already indicated that the SEC has the authority it needs to regulate crypto exchanges and stablecoins.

At an event last month, he said that cryptocurrency markets and related platforms would not end well if they stayed outside regulators' purview. But, on the other hand, these platforms might succeed if they submit to regulation under existing tax compliance, money laundering and insider trading laws. 

In Sept. 14 testimony before the Senate, Gensler raised concerns about several crypto companies operating outside the regulatory framework and the lack of investor protections in place.

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