Today in crypto, Andreessen Horowitz has penned an open letter to the US Senate Banking Committee urging scrapping the “ancillary asset” concept in draft crypto legislation, warning of loopholes, public companies buying crypto have promised to spend $8 billion just in the last week, and the US Securities and Exchange Commission (SEC) launched “Project Crypto,” promising to overhaul digital asset rules.
Andreessen Horowitz warns of loopholes in draft US crypto rules
Venture capital firm Andreessen Horowitz (a16z) called on US lawmakers to revise a draft crypto regulation bill, warning that the proposed framework could open dangerous loopholes and undermine investor protections.
In a Thursday open letter to the US Senate Banking Committee, the investment firm urged regulators to close loopholes in the draft crypto legislation. The letter was a response to the discussion draft released in late July.
The discussion draft in question builds on the 21st Century Financial Innovation and Technology Act (CLARITY Act) and seeks industry input on the ongoing crypto regulation. A16z points to the definition of ancillary assets, referring to tokens sold with an investment contract that give buyers no equity, dividend or governance rights.
“The ancillary asset construct should not serve as the foundation for legislation without significant modifications,” the letter said.
A16z said the current approach fails to resolve core issues facing crypto markets and would be incompatible with the Howey test, the long-standing legal benchmark for defining securities.
Crypto treasury firms plan $8 billion buying blitz
Crypto treasury firms have begun moves to buy over $7.8 billion worth of crypto this week, with altcoins emerging as a popular bet.
Cointelegraph analyzed 16 company statements since Monday, which either announced a plan to buy or raise money for crypto, with at least five having bought or promising to buy over $3 billion worth of Ether (ETH) — the hottest target of the week.
Some of the notable moves since Monday saw Tron Inc. — linked to Justin Sun’s Tron blockchain — say it wants to raise $1 billion to buy the blockchain’s token, Tron (TRX), while YZi Labs, linked to Binance co-founder Changpeng Zhao, helped launch a BNB (BNB) buying firm with a $500 million deal.
Bitcoin (BTC) still saw the largest total buys, with Strategy leading the way by scooping up around $2.5 billion worth using the proceeds from its fourth preferred stock, STRC.
Galaxy Research analyst Will Owens wrote in a report, however, that the business model isn’t without its risks and the sector “is becoming increasingly crowded.” He added that crypto treasury companies “can become structurally fragile” if hundreds of firms make “ the same one-directional trade.”
US SEC rolls out “Project Crypto” to rewrite rules for digital assets
US Securities and Exchange Commission Chair Paul Atkins has announced “Project Crypto,” an initiative to modernize the agency for the digital finance age and establish clear regulations for digital assets in the United States.
Atkins said Project Crypto was in direct response to recommendations in a recent report by the President’s Working Group on Digital Assets.
Atkins proposed easing licensing rules to allow for multiple asset classes or instruments to be offered by brokerages under a single license, while also creating a clear market structure separating commodities, which most cryptocurrencies fall under, from securities.
Regulatory exemptions or grace periods should be afforded to early-stage crypto projects, initial coin offerings, and decentralized software to allow these projects enough room to innovate, without crushing them under the weight of litigation or fear of reprisal by the SEC, Atkins said.
Additionally, the SEC chair said crypto business shouldn’t be forced to establish decentralized autonomous organizations (DAOs) to avoid regulation. He also said the right to self-custody must be protected by law. Atkins wrote:
“Many of the Commission’s legacy rules and regulations do not make sense in the twenty-first century — let alone for on-chain markets. The Commission must revamp its rulebook so that regulatory moats do not hinder progress and competition, from both new entrants and incumbents, to the detriment of Main Street.”
Outfitting the SEC for internet capital markets and onchain finance has been a stated goal of the new SEC chair and a way to cement US leadership in crypto.
