Summary of The Digital Clarity Act of 2022
The Digital Clarity Act of 2022, also known as S.5030, is a proposed legislation that seeks to create a temporary safe harbor for digital asset exchanges from SEC enforcement actions, clarify liabilities that exist under existing securities laws and clarify the classification of digital assets.
If enacted in its current form, the Act would establish that a digital asset would not be considered a security if the following conditions were met: (1) the digital asset is listed through an intermediary that meets certain disclosure requirements and has certain investor protections and (2) the digital asset is one that is not subject to a determination by the SEC or a federal court.
Who proposed The Digital Clarity Act of 2022?
The Digital Clarity Act of 2022 was introduced September 29, 2022 by Senator Senator Bill Hagerty (R).
How would The Digital Clarity Act of 2022 affect the SEC’s regulation of cryptocurrency?
The Digital Clarity Act of 2022 would require that following a final judgment from a federal court or an SEC determination without objection from the CFTC that a digital asset is a security, the Division of Examinations request information from an intermediary listing the asset to determine if the intermediary meets the proposed disclosure and investor protection requirements stated above. The Act’s current text states that if the Division of Examinations does find that an intermediary meets the above requirements, then the intermediary may enjoy a two-year safe-harbor period which S. 5030 refers to as a “compliance period,” during which the intermediary would not be subject to SEC enforcement actions for either listing the asset or failing to register as a national securities exchange or broker-dealer in connection with that asset.
What is the current status of S.5030?
As of March 10, 2022, The Digital Clarity Act of 2022 has been referred to the Committee on Banking, Housing, and Urban Affairs.