The U.S. Senate has released a draft of the "Responsible Financial Innovation Act," promoting the clarification of the classification and regulatory framework for digital assets.

On July 22, the U.S. Senate Banking Committee released a discussion draft titled "The Responsible Financial Innovation Act," aimed at establishing a clear framework for the classification and regulation of digital assets. This draft is a follow-up to the CLARITY Act introduced earlier this month, designed to further refine the regulatory definition of digital assets and enhance the authority of U.S. financial regulatory agencies. The draft clarifies the classification of digital assets as "ancillary assets" and proposes a new regulatory framework intended to address the issues that the existing framework cannot effectively respond to regarding the unique characteristics of digital assets.

The draft emphasizes the classification of digital assets and the delineation of responsibilities and authorities of regulatory agencies

An important update to the draft is the redefinition of "ancillary assets," which refer to digital assets associated with investment contracts but lacking equity rights, dividends, or debt obligations. This classification helps determine whether digital assets should be regulated by the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC).

The draft also proposes a rights-based classification method, rather than the "decentralized" maturity test previously proposed by the House. Under this new method, the CFTC is responsible for regulating digital assets, while the SEC regulates non-affiliated assets. Project parties can self-certify assets as affiliated, but the SEC has 60 days to contest this classification.

Senator Tim Scott stated that this bill aims to modernize the disclosure requirements under the Securities Act of 1933, addressing the issue that the existing framework cannot respond to the unique nature of digital assets. He emphasized that the goal of the bill is to provide clear rules for digital assets, protect investors, foster innovation, and ensure that the future of digital finance can take root in the United States.

Impact on the Industry and Stakeholder Expectations

Senator Cynthia Lummis pointed out that this draft represents a thoughtful and balanced approach that will provide innovators with the clear guidance they need while ensuring strong consumer protection. She also stated that the current regulatory uncertainty has driven American innovation overseas and that this issue must be addressed.

The draft not only focuses on the classification of digital assets but also proposes updates to the securities law, aiming to modernize regulatory practices, curb illegal financial activities, and support innovation in the banking sector. The draft also calls for collecting feedback from various parties in the cryptocurrency and financial industries to further improve the legal framework.

Background and Subsequent Developments

Currently, the Senate Banking Committee is collecting feedback on the draft, and the final version may be submitted as formal legislation, undergoing hearings, revisions, and further debate. Previously, on July 17, the CLARITY Act was passed in the House of Representatives, receiving broad bipartisan support (294 votes in favor, 134 votes against). However, the bill also faces opposition from groups such as Americans for Financial Reform (AFR), which criticize it for weakening consumer protections and excessively tilting regulatory power towards the industry.

Conclusion: The release of the draft "Responsible Financial Innovation Act" marks an important step for the United States in the regulation of digital assets. While it is still in the consultation phase, this draft provides a clear direction for the future regulation of digital assets. If passed, it is expected to drive a more explicit and effective regulatory framework for digital assets, enhancing the United States' leadership position in the global digital finance arena.