The news that one of the world’s leading online payments companies will allow its 325 million account holders to conduct transactions using cryptocurrencies serves as a high-profile indicator of the increasing maturity of cryptocurrency and blockchain technologies, which are rapidly moving towards mainstream adoption. Recognizing that regulatory clarity is needed, and that an appropriate balance between regulation and innovation must be struck to facilitate responsible market adoption, members of Congress have recently advanced legislation that will aid the development and adoption of blockchain technologies by businesses, consumers, and governments. In the autumn of 2020, several notable pieces of legislation were advanced, offering a preview of Congressional efforts to address these issues in the 117th Congress.
The 116th Congress saw dozens of proposed blockchain-related bills, most of which failed to make headway. Proposed legislation focused on the desire of some members of Congress to encourage the everyday use of blockchain technologies, protect consumers, ensure data privacy and cybersecurity, and cut down on the use of virtual currencies for illicit purposes such as money laundering and criminal financing. While many of these efforts stalled, in September 2020, the Blockchain Innovation Act (H.R. 8153) and the Digital Taxonomy Act (H.R. 2154) were advanced out of the House Energy and Commerce Committee, and passed by the House of Representatives as part of the Consumer Safety Technology Act (H.R. 8128). At the same time, the House approved the American Competitiveness on More Productive Emerging Tech Economy (COMPETE) Act (H.R. 8132), which incorporated the Advancing Blockchain Act (H.R. 6938).
Additionally, in September, a bipartisan group of representatives introduced the Digital Commodity Exchange Act of 2020, or DCEA (H.R. 8373). The bill is designed to bridge regulatory gaps between the Commodities Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) in digital asset markets, and provide a national framework to regulate cryptocurrency exchanges. Representatives David Schweikert (R-Ariz.) and Darren Soto (D-Fla.) also introduced the Blockchain Records and Transactions Act of 2020 (H.R. 8524). The bill, which falls under the jurisdiction of the House Energy and Commerce Committee, would make smart contracts created, stored, or secured through a blockchain legally binding, and help advance broader enterprise adoption of blockchain technologies.
The Blockchain Innovation Act focuses on the use of blockchain technology in commerce, and instructs the U.S. Department of Commerce to consult with the Federal Trade Commission to conduct a study and submit a report on the state of blockchain technology, including its use to reduce fraud and increase security. A goal of the legislation is to establish a Blockchain Center of Excellence within the Commerce Department. The Digital Taxonomy Act authorizes funding for the FTC to prevent unfair or deceptive acts or practices in transactions relating to digital tokens, and requires the FTC to report to Congress on the commission’s actions related to digital tokens. Notably, while both bills gained House approval, they must still be passed by the U.S. Senate. If this is not achieved by the end of the 116th Congress, they will need to be reintroduced in the 117th Congress, and receive funding through appropriations legislation where needed.
The bipartisan American COMPETE Act passed the House of Representatives alongside the Consumer Safety Technology Act, and seeks to maintain the United States’ competitiveness in leading edge technology vis-à-vis China. The Act consists of eight individual, previously-introduced bills addressing technology issues such as 3D printing, the Internet of Things, artificial intelligence, and blockchain technology. The blockchain technology section incorporates the previously introduced Advancing Blockchain Act (H.R. 6938). This bill requires the Department of Commerce to study and report on blockchain technology’s impact on U.S. businesses and industry sectors that are developing and using blockchain, public-private partnerships promoting blockchain, federal agencies asserting jurisdiction over these industry sectors, and the risks and trends of blockchain technology. After House passage, the American COMPETE Act was referred to the Senate Commerce, Science, and Transportation Committee where it currently remains.
Late September also saw the introduction of the DCEA and the reintroduction of the Blockchain Records and Transactions Act of 2020 in the House of Representatives. The DCEA would create a national regulatory framework for the CFTC to regulate digital commodity exchanges, thereby simplifying the digital asset spot market and preempting existing state-by-state money transmitter licensing requirements for digital commodity exchanges. For digital commodity exchanges that choose to participate in the voluntary CFTC regime, this would have the effect of reducing regulatory burdens. The DCEA would also impact how new digital commodities are brought to market, clarifying CFTC and SEC jurisdictional lines, and reforming the process for determining whether digital commodities should be made available for public trading.
The introduction of the DCEA served as a marker, allowing public review of the proposed framework and an opportunity to provide feedback to the bill’s sponsors. It is expected that an updated version will be reintroduced during the 117th Congress in the House Agriculture Committee and undergo a committee markup process before potentially proceeding to the House floor. Nevertheless, even with House passage, gaining Senate approval for the legislation will remain a hurdle. Similarly, the Blockchain Records and Transactions Act would need to be reintroduced in the 117th Congress and make its way through the House Energy and Commerce Committee. The bill was previously introduced in the 115th Congress, however it failed to gain traction.
The House passage of the Blockchain Innovation Act, the Digital Taxonomy Act, and the America COMPETE Act, as well as the introduction of DCEA and the Blockchain Records and Transactions Act, represents a late session push to build legislative momentum on blockchain and cryptocurrency issues heading into the 117th Congress. As is often the case, making legislative progress in the Senate is a challenge, and as these and other related bills are reintroduced in the House next Congress, the issue will be the Senate’s willingness to address them. Rapid industry developments, broader consumer and business adoption, and increased engagement between the private sector and policymakers will help make this case to legislators.