The U.S. House of Representatives has submitted the CLARITY bill, which may shift the majority of virtual currencies to regulation as "merchandise."

## Many cryptocurrencies classified as commodities

On the 29th, U.S. House members introduced the Digital Asset Market Transparency Act (CLARITY Act) in a bipartisan manner. This follows the “Financial Innovation and Technology for the 21st Century Act (FIT21).”

The majority of cryptocurrencies (virtual coins) are clearly excluded from the definition of securities, and the supervisory authority will be transferred from the Securities and Exchange Commission (SEC) to the Commodity Futures Trading Commission (CFTC).

According to the current wording of the bill, digital assets that are “essentially tied to a blockchain system” should be considered digital commodities if they meet conditions such as being used to transfer value among participants in the blockchain system.

This definition is quite broad, so it is likely that the majority of major virtual coins may apply.

On the other hand, the bill states that virtual currencies that meet the definition of securities or securities derivatives are not considered commodities. However, the regulatory authorities have not clearly defined the criteria by which an asset should be classified as a security or a commodity.

On the 12th, SEC’s new Chairman Paul Atkins stated that he intends to establish clear and reasonable guidelines regarding the circulation of cryptocurrencies that are considered securities or investment contracts.

Angie Craig, the Democratic chair of the House Agriculture Committee, explained the significance of the bill as follows.

Digital assets such as cryptocurrencies are transitioning from being positioned as novel financial products to assets that are increasingly integrated into a broader financial structure.

I believe it is essential for the legislature to establish clear protections for consumers and individual investors, as well as rules for companies dealing with digital assets.

Additionally, the “CLARITY Act” continues to ensure oversight and regulation of digital assets within the financial system, allowing business leaders, innovators, and consumers to enter the market with a clear understanding of the rules.

According to the bill, asset issuers may also undergo scrutiny to be classified as a more stringent “mature blockchain system.” While assets considered “commodities” do not need to meet this criterion, there is a possibility of obtaining additional regulatory relief if they do meet the standards.

To meet the definition of a “mature blockchain system,” it must be open source and automated, and cannot be controlled by a single individual or entity. Such entities cannot exercise “substantial ownership” exceeding 20% of the assets.

In addition, the bill mandates that virtual currency platforms be regulated as financial institutions under the Bank Secrecy Act.

In addition, there are no detailed regulations regarding DeFi (decentralized finance), and it includes a request to the U.S. Department of the Treasury, SEC, and CFTC to investigate this area and report within a year.

DeFi (Decentralized Finance) is

Refers to financial services or systems that operate without a central authority, utilizing blockchain technology. An abbreviation for “Decentralized Finance.” Financial services conducted in DeFi include the issuance of stablecoins, lending of coins, and cryptocurrency exchanges. Many platforms utilize the Ethereum blockchain.

Regarding cryptocurrencies, a stablecoin regulation bill is currently being deliberated in both houses.