US Lawmaker Proposes Safe Harbor Bill, Echoing SEC Commissioner Peirce

A top Republican in the House of Representatives is looking to make it easier for crypto startups to raise funds without running afoul of U.S. securities law.

Rep. Patrick McHenry (R-N.C.), the ranking member on the House Financial Services Committee, unveiled a safe harbor bill on Tuesday ahead of a committee hearing with Securities and Exchange Commission Chair Gary Gensler.

The “Clarity for Digital Tokens Act of 2021″ would effectively codify SEC Commissioner Hester Peirce’s Token Safe Harbor proposal, a pitch the regulator made in 2020 and 2021 to create a pathway for crypto startups to launch token sales to fund their projects without fear of SEC enforcement.

McHenry has quietly proposed a number of crypto-friendly bills, including calling on federal agencies to create a working group to fully define crypto regulations.

Under the Peirce proposal, these businesses would have three years to either register with the securities regulator or meet a set of requirements to prove themselves fully decentralized.

McHenry’s bill echoes the tenets of Peirce’s proposal, with provisions addressing when startups would have to register or or how they can verify that their projects no longer meet the federal definition of a “security.”

“Unfortunately, our current regulatory framework threatens to push this technology – and the jobs created by this rapidly growing industry – overseas,” McHenry said in a statement. “My bill, which builds on the great work of SEC Commissioner Hester Peirce, will help provide the necessary legal certainty to digital asset projects when they launch.”

The bill includes a number of provisions around disclosure, including requiring businesses to share information about transactions and the secondary platforms on which their tokens trade.

There is also a provision that would require startups trying to launch via an initial coin offering that they must warn investors “the purchase of tokens involves a high degree of risk and the potential loss of money.”

Industry proponents praised the effort in statements on Tuesday. Perianne Boring, the president of the Chamber of Digital Commerce, said the bill “has the potential” to create a path for startups in the crypto industry.

Jerry Brito, the executive director of Coin Center, noted that the bill would modify existing law to “account for the new realities of these technologies.”

Blockchain Association Executive Director Kristin Smith added, “This regulatory uncertainty has been stifling innovation for years and thereby resulting in an exodus of innovators from the U.S. to jurisdictions with a clear regulatory framework.”