Financial Innovation and Technology for the 21st Century Act

Received in the Senate and Read twice and referred to the Committee on Banking, Housing, and Urban Affairs.

Sep 9, 2024

This bill creates a regulatory framework for digital assets based on blockchain characteristics. The CFTC gains exclusive authority to regulate digital assets as commodities if their blockchain is functional and decentralized (defined by criteria including no single person having unilateral control and no issuer holding 20% or more of the asset or voting power). The SEC regulates digital assets as securities if their blockchain is functional but not decentralized, with specified exceptions for assets meeting certain sales limits, investor restrictions, and disclosure requirements. The CFTC and SEC must jointly issue rules defining key terms and exempting dually registered exchanges from redundant regulations.

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Financial Innovation and Technology for the 21st Century Act This bill establishes a regulatory framework for digital assets. The Commodity Futures Trading Commission (CFTC) must regulate a digital asset as a commodity if the blockchain, or digital ledger, on which it runs is functional and decentralized. The bill classifies a blockchain as decentralized if, among other requirements, no person has unilateral authority to control the blockchain or its usage, and no issuer or affiliated person has control of 20% or more of the digital asset or the voting power of the digital asset. In addition, the bill provides the CFTC with exclusive regulatory authority over cash or spot markets for digital commodities. The Securities and Exchange Commission (SEC) must regulate a digital asset as a security if its associated blockchain is functional but not decentralized. However, the bill establishes certain exceptions to SEC regulation for digital assets that limit annual sales, restrict nonaccredited investor access, and satisfy disclosure and compliance requirements. The bill also sets forth requirements for primary and secondary market transactions. The CFTC and SEC must jointly issue rules to define terms and exempt dually registered exchanges from duplicative rules.