Congressman Emmer Introduces ‘Securities Clarity Act’

Republican congressman Tom Emmer introduced a bill on Thursday intended to provide clarity to the web3 industry regarding the rules for digital asset firms.

The Securities Clarity Act seeks to codify that assets that do not comprise a security per the 1933 Securities Act are not classified as securities in the event that they are sold under an investment contract, which is itself a security.

“The Securities Clarity Act inserts a key term, the ‘investment contract asset,’ into existing securities law to enable crypto projects to reach their full potential in a compliant way,” Emmer tweeted.

Jerry Brito, the executive director of Coin Center, a non-profit web3 lobbying group, praised the bill. “This is the smartest approach we have seen to provide clarity about how securities law applies to digital assets,” he said.

The bill comes just days after the European Union approved MiCA, a comprehensive package of digital asset regulations.

The SEC faces stiff criticism from web3 industry stakeholders, public officials, and other regulatory agencies for pursuing a campaign of regulation by enforcement targeting the crypto industry. In September, critics decried the SEC for burying itsclaim that the entire Ethereum ecosystem falls under its regulatory jurisdiction, deep in a complaint filed against a 2018 initial coin offering (ICO).

Coinbase, the top U.S. crypto exchange,sued the SEC last month after the agency failed to respond to a previous petition demanding the SEC adhere to its formal rulemaking process and deliver regulations informed by public input.

Investment Contract Asset

The bill argues digital assets that are not securities are often “unnecessarily conflated” with the investment contracts they may be sold or distributed under.

“Without a distinction between the asset and the securities contract, token projects that raise capital to fund development cannot move out of the securities framework once the project is decentralized, which hinders the utility of the project and ultimately harms token holders,“ the bill states.

If passed, the bill proposes amending the Securities Act to state that “the term ‘security’ does not include an investment contract asset.” The amendments also would define an “investment contract asset” as an asset “sold or otherwise transferred… pursuant to an investment contract that is not otherwise deemed a security.”

The amendments would specifically note that digital assets may meet the criteria for investment contract asset classification.

The bill also notes that similar amendments should also be made to the Investment Advisers Act of 1940, the Investment Company Act of 1940, the Securities Exchange Act of 1934, and the Securities Investor Protection Act of 1970.