Six key points to understand the draft digital asset market framework of the US Financial Services Commission

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2023-06-05 20:00 (UTC+8)

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A comprehensive overview of digital asset classification, regulatory responsibilities, innovation and coordination, and regulatory transition measures from six aspects

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A comprehensive overview of digital asset classification, regulatory responsibilities, innovation and coordination, and regulatory transition measures from six aspects

Original source:U.S. House of Representatives official website

Original compilation: Jordan, PANews

On June 1, Hong Kong's "Guidelines Applicable to Virtual Asset Trading Platform Operators" came into effect. Just two days later, Patrick McHenry, Chairman of the Financial Services Committee of the United States House of Representatives, and Glenn "GT" Thompson, Chairman of the House Agriculture Committee, jointly released a figure The draft asset market structure discussion aims to provide a statutory regulatory framework for digital assets to further clarify regulatory gaps, promote innovation, and provide adequate consumer protection. This article is the official summary of the Digital Asset Market Structure Discussion Draft issued by the Financial Services Committee of the U.S. House of Representatives. It provides a comprehensive overview of digital asset classification, regulatory responsibilities, innovation and coordination, and regulatory transition measures from six aspects. etc., as follows:

The draft discussion draft of the digital asset market structure intends to give the U.S. Commodity Futures Trading Commission jurisdiction over digital commodities, and will also clarify the U.S. Securities and Exchange Commission’s jurisdiction over digital assets based on “investment contracts”. Not only that, but the bill also sets out the process by which the United States allows digital commodities to be traded in the secondary market, provided that the digital commodity is initially offered as part of an investment contract. SEC-registered entities enforce strong client protections.

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1. Clearly classify whether digital assets are securities or commodities

In addition, the bill also clarifies the definitions of "decentralized network" and "functional network" and provides a certification process, according to which digital asset issuers can prove to the US Securities and Exchange Commission that the network related to digital assets is decentralized. centralized. If the U.S. Securities determines that the certified digital asset issuer does not comply with the Act, it may not be recognized, but must provide a detailed analysis of the reasons for the refusal.

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The "Draft Discussion on the Digital Asset Market Framework" pointed out that digital asset trading platforms should be able to register as an alternative trading system (ATS). If a platform trading digital assets is exempted and can operate as an alternative trading system, then the US Securities and Exchange Commission will Registration applications for this platform cannot be rejected. The bill would also allow alternative trading systems to offer digital goods and use stablecoins for payment on their platforms, and would require the SEC to amend its rules to allow broker-dealers to custody digital assets subject to certain requirements. On the other hand, the bill will require the US Securities and Exchange Commission to develop rules to ensure that certain digital asset regulations adapt to the development of modern markets.

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3. Regulatory Responsibilities of the Commodity Futures Trading Commission

The Digital Asset Market Framework Discussion Draft proposes that the United States will create a Digital Commodity Exchange (DCE) framework similar to the existing trading framework for designated contract markets and swap execution facilities in the US Commodity Exchange Act (CEA). For a registered digital commodity exchange, it is necessary to comply with the requirements of the Digital Asset Market Framework Discussion Draft, as well as certain long-standing core principles of the U.S. Commodity Exchange Act and U.S. Commodity Futures Trading Commission regulations, such as trading activity monitoring, prohibition Abuse of trading behavior, minimum capital requirements, public reporting of trading information, trading conflicts of interest, governance standards and network security, etc., digital commodity exchanges must also be registered with the American Futures Association, and if they provide services directly to customers, they must abide by the American Futures Association customer protection rules.

It should be noted that if a "digital commodity" needs to be listed, the digital commodity exchange must prove to the US Commodity Futures Trading Commission that the relevant digital commodity will not be manipulated before the transaction is launched, and provide usability, structure, function and public information at the same time.

The proposed bill also proposes that customer asset protection needs to be strengthened on the basis of existing commodity market requirements imposed on futures commission merchants (FCMs). Relevant custodians must also be subject to minimum regulatory and comprehensive regulatory standards set by the U.S. Commodity Futures Trading Commission. In addition, when futures commission merchants act as counterparties, the bill clearly requires futures commission merchants to provide bankruptcy protection for clients.

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The Digital Asset Market Shelf Discussion Draft would allow a single entity to obtain multiple licenses from the CFTC, depending on the nature of the services the entity performs, but would not allow exchanges to register directly as dealers. Additionally, the bill would allow certain entities to dual-register with the CFTC and the SEC to facilitate the trading of multiple types of digital assets.

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5. Innovation and coordination

The bill also proposes the establishment of a Joint Advisory Committee on Digital Assets jointly composed of the SEC and the CFTC, which will consist of 20 market participants who will report to the SEC and CFTC Provide advice related to digital assets. The bill requires the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission to conduct joint research on decentralized finance, and requires the U.S. Department of Commerce to consult with the White House Office of Science and Technology, the U.S. Securities and Exchange Commission, and the U.S. Commodity Futures Trading Commission to conduct research on non-fungible digital assets. (NFT) for research.