“For months, our committees have worked collaboratively to establish a viable regulatory framework for digital assets necessary to protect consumers and promote American innovation. Today’s release of the discussion draft brings us one step closer to bringing regulatory certainty to these novel and emerging technologies,” said Chairman Thompson.[1]
A new bill has been proposed by the United States congress that defines and alters several web.3 related definitions and modifies registration for digital asset intermediaries to the securities and exchange commission.
The bill proposes that the term ‘decentralized organization’ (DO) once known as Decentralized Autonomous Organization (DAO’s) must change, this definition now encapsulates every organization that does not directly engaged in an activity that requires registration with the Commission or the Commodity Futures Trading Commission other than those that:
- ‘‘develop, publish, manage, or administrate a blockchain network; or
- ‘‘an activity with respect to which the organization is exempt from such registration.[2]
The term ‘decentralized organization’ means, with respect to a blockchain network, any organization of persons using the digital assets related to such blockchain networks to form consensus in the development, publication, management, or administration of such blockchain network, which is controlled by the entirety of persons holding such digital assets and not by any particular person.[3]
Title I of the Bill introduces specific requirements for digital asset issuers and their affiliates. According to the text the term ‘decentralized network’ means the following conditions are met[4]:
- During the previous 12-month period, the issuer or any affiliated person did not beneficially own 20 percent or more units of a digital asset outstanding at any time, and did not have the unilateral authority to direct 20 percent or more of the voting power of such digital assets;
- In the previous 3 months, there was no implementation or contribution of any intellectual property that materially alters the functionality or operation of the blockchain network by the digital asset issuer, affiliated person, or any related party;
- During the previous 3-month period, neither the issuer nor any affiliated person engaged in public marketing of the digital assets or the blockchain network, nor issued any units of the digital asset;
- During the previous 12-month period, all units of the digital asset that were issued through the programmatic functioning of the blockchain network were distributed to end users.
The bill focuses on addressing concerns related to ownership concentration and control within the digital asset space. It imposes limitations on beneficial ownership and unilateral voting power, excluding decentralized organizations.
In conclusion, the newly proposed bill by the United States Congress brings significant changes and regulations to the web3 and crypto asset landscape. It introduces modifications to key definitions and alters the registration requirements for digital asset intermediaries with the Securities and Exchange Commission. The bill emphasizes the redefinition of “decentralized organization” (DO) and broadens its scope to include any organization that is not engaged in activities requiring registration, except for specific exemptions.
[1] https://financialservices.house.gov/news/documentsingle.aspx?DocumentID=408838
[2]https://media.licdn.com/dms/document/media/D4D1FAQFDcBhAdUqXzQ/feedshare-document-pdf-analyzed/0/1685872177513?e=1687392000&v=beta&t=KuUYbjKmcOZRRu6LTnsp54SmiSk67FmAURxRHBcIxy0
[3]https://media.licdn.com/dms/document/media/D4D1FAQFDcBhAdUqXzQ/feedshare-document-pdf-analyzed/0/1685872177513?e=1687392000&v=beta&t=KuUYbjKmcOZRRu6LTnsp54SmiSk67FmAURxRHBcIxy0
[4]https://media.licdn.com/dms/document/media/D4D1FAQFDcBhAdUqXzQ/feedshare-document-pdf-analyzed/0/1685872177513?e=1687392000&v=beta&t=KuUYbjKmcOZRRu6LTnsp54SmiSk67FmAURxRHBcIxy0
