The Clarity for Digital Tokens Act of 2021 was <a href="https://republicans-financialservices.house.gov/uploadedfiles/tsh_xml_signed.pdf" target="_blank" rel="nofollow noopener">proposed </a>on October 5 by Patrick McHenry, ranking member of the House Financial Services Committee.

The bill would amend the Securities Act of 1933 to provide a three-year safe harbor for digital token development teams to sell it without full registration as a securities offering if the network decentralizes during that time.
<h2>House Financial Services Committee Adopts Legislation to Provide a Safe Harbor for Digital Tokens</h2>
The safe harbor proposed by <a href="https://www.cryptoknowmics.com/news/crypto-mom-hester-pierce-of-sec-believes-true-decentralization-will-save-defi-projects/">SEC Commissioner Hester Peirce</a> for digital tokens now has some congressional support.

Patrick McHenry, the ranking member of the House Financial Services Committee, introduced the Clarity for Digital Tokens Act of 2021 on October 5.

The bill would modify the Securities Act of 1933 to allow digital token development teams to sell tokens without full registration as a securities offering for three years if the network decentralizes during that period.

Token issuers would be required to meet industry-specific disclosure standards under the rules of the law. 

Source code, development plans, and "details describing the launch and supply process, including the number of tokens to be issued in an initial allocation, the total number of tokens to be generated, the token release timetable, and the final number of tokens outstanding" are among them.

Development teams seeking to use the safe harbor would also be required to provide exit reports proving enough decentralization.
<h2>The Law is Hester Peirce's Long-Standing Recommendation to the SEC</h2>
The safe harbor is the legislative form of Hester Peirce's long-standing concept. 

Following the initial coin offering boom of 2017-2018, the SEC increased its oversight of token issuance, requiring that issuers register their offers with the agency.

The measure was <a href="https://republicans-financialservices.house.gov/uploadedfiles/2021-10-5_letter_to_chair_gensler.pdf" target="_blank" rel="nofollow noopener">introduced</a> only half an hour before a hearing with SEC Chairman <a href="https://www.cryptoknowmics.com/news/gary-gensler-reiterates-sec-will-lend-its-full-support-to-bitcoin-futures-etf/">Gary Gensler</a> before the Financial Services Committee. 

McHenry asked the SEC several questions on the SEC's engagement with cryptocurrencies, specifically its expectations for cryptocurrency exchanges and stablecoins. 

The Blockchain Association, Coin Center, and Association for Digital Asset Markets have all <a href="https://financialservices.house.gov/uploadedfiles/hhrg-117-ba00-wstate-genslerg-20211005.pdf" target="_blank" rel="nofollow noopener">expressed </a>their support for McHenry's legislation.
"Many platforms have dozens or hundreds of tokens on them. While each token’s legal status depends on its facts and circumstances, the probability is quite remote that, with 50, 100, or 1,000 tokens, any given platform has zero securities. Make no mistake: To the extent that there are securities on these trading platforms, under our laws they have to register with the Commission unless they qualify for an exemption."
McHenry's status as Republican head of the House Financial Services Committee implies increased support for legislation to regulate bitcoin and other cryptocurrencies. 

While numerous laws have been filed to clarify cryptocurrency regulation, the majority of them have failed.

House Financial Services Committee Sets Law to Provide a Safe Harbor for Digital Tokens

Rep. Patrick McHenry's Clarity for Digital Tokens Act of 2021 backs a "safe harbor" proposal by SEC Commissioner Hester Peirce.

Kavya Barua is a voracious learner who is fascinated by crypto and Fintech advancements. Graduated from Janki Devi Memorial College's B.A (Hons) English program at the University of Delhi. She aspires to be a successful professional, having a keen interest in learning and achieving results.

House Financial Services Committee Sets Law to Provide a Safe Harbor for Digital Tokens

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