SEC hears from Blockchain Assoc., House Republicans on ‘exchange’ definition proposal

SEC Hearing

The SEC held a hearing on Wednesday to discuss a proposal from the Blockchain Association and House Republicans that would define digital asset exchanges. The proposal seeks to clarify the definition of an “exchange” under the Securities Exchange Act of 1934 and the Commodity Exchange Act of 1936.

The hearing was attended by representatives from the Blockchain Association, the House Financial Services Committee, the SEC, and the Commodity Futures Trading Commission. The discussion focused on the potential implications of the proposed definition and the various legal and regulatory implications of digital asset exchanges.

The proposal would define a digital asset exchange as “a platform that facilitates the exchange of digital assets for other digital assets, fiat currency, or other property, and that is registered with the SEC or the CFTC.” The proposal also seeks to clarify the definition of a “security” under the Securities Exchange Act of 1934.

The SEC and CFTC have yet to take a stance on the proposal, but the hearing shows that they are taking the issue seriously. It remains to be seen if the proposal will be adopted, and if so, how it will be implemented.

Exchange Definition Proposal

The U.S. Securities and Exchange Commission (SEC) recently heard from the Blockchain Association and House Republicans on a proposed definition of “exchange” as it relates to digital assets. The proposal seeks to provide clarity on the definition of a digital asset exchange and how it should be regulated.

The proposal was introduced by Rep. Warren Davidson (R-Ohio) and Rep. Tom Emmer (R-Minn.), both members of the Congressional Blockchain Caucus. The proposal seeks to define a digital asset exchange as “an entity that provides a marketplace or facility for bringing together purchasers and sellers of digital assets, whether by means of established non-discretionary methods of trading or through the provision of a marketplace or facility that regularly brings together purchasers and sellers of digital assets.”

The proposal also seeks to provide clarity on the types of activities that would be considered digital asset exchanges and the types of activities that would not be considered digital asset exchanges. For example, the proposal states that the activities of a digital asset exchange would include “the provision of a marketplace or facility for bringing together purchasers and sellers of digital assets, whether by means of established non-discretionary methods of trading or through the provision of a marketplace or facility that regularly brings together purchasers and sellers of digital assets.”

The proposal also seeks to clarify the types of activities that would not be considered digital asset exchanges, such as “the provision of custodial services for digital assets, the provision of services related to the transfer of digital assets, or the provision of services related to the storage of digital assets.”

The proposal has been welcomed by the Blockchain Association, which represents leading companies in the blockchain and digital asset space. The association believes that the proposal provides clarity on the definition of a digital asset exchange and how it should be regulated. House Republicans have also expressed their support for the proposal.

SEC Response

The SEC was generally receptive to the proposal but raised questions about how it would be implemented and how it would affect existing regulations. The SEC noted that the proposal could create a new category of digital asset exchanges, and that this could potentially create new regulatory requirements. The SEC also asked if the proposed definition would be applicable to all digital asset exchanges, or just certain types.

The SEC also asked for clarification on how the proposed definition would interact with existing regulations on digital asset exchanges. The SEC noted that the proposed definition could potentially conflict with existing regulations, and asked if the proposed definition would be used to supersede existing regulations.

Overall, the SEC was receptive to the proposal, but raised several questions about how it would be implemented and how it would interact with existing regulations. The SEC also asked for clarification on how the proposed definition would be applied to different types of digital asset exchanges.