On crypto market structure, the Senate keeps it simple
Why it matters: These two versions need to become one, setting up a clash of regulatory philosophies and strategic priorities — the House's broad framework that goes heavy on the details, or the Senate's that seems more designed to get passed.
The big picture: Since the initial coin offering frenzy of 2017, the lingering question has been: Which blockchain assets count as securities, and which don't?
This is important, because securities that haven't been approved for trading on public markets have hefty limitations on who can hold them and how they can change hands.
For a long time, the nation's securities regulator felt they were all securities. The crypto industry disagreed, and the courts turned out to be divided on the point.
Now Congress is stepping in.
Zoom in: The House and Senate bills both start by declaring that certain digital assets will always be treated as securities. But both provide a path for other coins to shed those restrictions.
They use different terminology, but they both seek to make clear that if a coin mainly exists to use and keep running some blockchain protocol, then it's not, on its own, something for the SEC to deal with.
Case in point: Ether and bitcoin are what keep the Ethereum and Bitcoin protocols running. They offer financial rewards that motivate a distributed array of unrelated people to keep the systems operational.
Both bills require certification for a new token with the SEC, making clear — with evidence — that the projects have made something that doesn't fit under a securities rubric.
Regulators can object, and then a back and forth can begin. If they don't, the asset graduates out of the agency's purview.
Reality check: The House bill gets in the weeds on some things, though.
For example, it has definitions for "decentralized finance messaging systems," "decentralized finance trading protocol" and "associated person of a digital commodity broker."
The Senate's bill cedes many of those details to regulators, leaving them to work out needed details later when it writes specific rules.
My thought bubble: It might change a lot, but it would make sense for CLARITY, the House bill, to remain the vehicle for final passage — that way the House can say it did a bill and the Senate can say it did one.
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