- Trump's crypto czar has set a September deadline for more crypto rules.
- Two key market structure bills are currently on the docket.
- Key details of each still need to be hammered out, say experts.
A version of this story appeared in The Guidance newsletter on August 4. Sign up here.
Hey all, Liam here.
The clock’s ticking, at least if you’re trying to keep Donald Trump’s crypto czar happy.
That’s because David Sacks has set a September deadline to wrap up additional sweeping crypto regulations in the US.
After landmark stablecoin rules hit the wire on July 14, all eyes are now on market structure rules. These will regulate the roughly 17,800 other tokens on the market that aren’t pegged to the dollar.
If passed, these rules will define which agency will regulate all those other tokens: the SEC or the CFTC.
There are two bills at work in the House and Senate, each of which defines how a token would suddenly find itself under the purview of either agency.
And if Sack’s September deadline is missed, experts say these rules need to be hammered out by the fourth quarter — or else.
“General consensus is if this doesn’t get done before the fourth quarter then it drops in priority and likely wont get done at all as attention turns to midterms,” Matt O’Connor, the co-founder of the onchain fundraising platform Legion, told me.
As it turns out, the world doesn’t revolve exclusively around crypto, and lawmakers need to strike while the iron’s hot.
Unfortunately, there’s some serious disparity between the two market structure bills currently in play.
The Clarity act, which was already voted out of the House in July, explains which agency would regulate a token based on its function.
It offers new projects a three-year safe harbour until they reach “sufficient decentralisation,” during which limited disclosures need to be filed with the SEC.
After that period, if projects meet the decentralised standard, they’d no longer need to report to the SEC.
The Senate discussion draft defines many cryptocurrencies as so-called ancillary assets. These are investment contracts without the various bells and whistles that make those contracts securities, such as voting rights or equity.
Between commodities and securities, ancillary assets exist as something of a third, grey-zone alternative. The CFTC would be the primary regulator, but the SEC would also have limited disclosure oversight of these assets.
For O’Connor, picking between the two is tricky, as each has its advantages and disadvantages.
Take, for instance, the provision of sufficient decentralisation.
“The bar for eligibility is low, opening the door to a lot of decentralisation theater, and the consequences for not meeting the criteria have not been determined,” he said.
And as there can only be one bill that becomes law, lawmakers will need to cut a middle ground here before it’s too late.
After all, Sacks is waiting.
Liam Kelly is a Berlin-based reporter for DL News. Got a tip? Email him at liam@dlnews.com.