Impact ‘ won’t be quarantined by crypto.”

Democrats on the House Financial Services Committee held a hearing Friday to discuss the pending crypto market structure bill. Meanwhile, eyewitnesses expressed concern about the potentially widespread impact of legislation on the US securities market.

Most hearings on the bill have previously been convened by the Republican majority on the committee, but today’s “minority days” has provided an unusual opportunity for Democrats to focus their attention on perceived flaws in legislation.

For the first time, the Clarity Act creates a legal framework in the United States for issuing and trading most crypto assets. It is partially exempt Most crypto assets From SEC monitoring.

On Friday, Democrat-selected witnesses expressed concern about the potential knock-on effects of such a strategy.

“The regulatory gap in this bill will not be segregated by crypto,” said Amanda Fischer, policy director at Better Markets, in his testimony before the committee.

By cutting out cryptos from the US securities laws that have existed since the 1930s, Fisher said the clear law would encourage everyday functions of “shoehorn,” such as raising capital to blockchain networks, as a way to dodge regulations and reduce costs.

Policy experts who previously served as Chief of Staff for Biden-era SEC Chairman Gary Gensler, comment Robinhood CEO Vlad Tenev said last year that operating Crypto Business is “a few digits cheaper” than operating traditional securities brokerage. Robinhood has expressed interest in moving much of its core business into a blockchain network by tokenizing assets.

“He does not have to pay for customer protection, SEC exams or SIPC insurance,” Fisher said, referring to the Securities Investor Protection Corporation, a federally mandated program to guarantee customer deposits at securities companies in the event of a company’s failure. “Of course, it’s cheap.”

Another concern raised by the panel on Friday focused on the Clarity Act’s two-tier system for classifying crypto assets. Most crypto tokens are exempt from SEC regulations as they are automatically considered “digital goods” under the bill. However, token issuers who want to engage in activities that are more similar to traditional securities offerings, such as institutional token sales, have the option to register as follows: “Mature Blockchain System” Using SEC is a year-long process with more stringent requirements.

Fisher argued that in her opinion, token issuers rarely engage in a more stringent process, given that the act of clarity already provides many loopholes.

“The crypto issuer claims they are defi. They claim they are not offering investment contracts. They claim they are collectibles or meme coins.

The position appeared to gain sympathy from industry-skeptical Democrats as well as key pro-cryptic members, including Rep. Sam Ricardo (D-CA), who expressed concern over a clear-cut handoff approach to certain crypto markets, particularly decentralized finance (DEFI). The bill explicitly carves defi activity out of its new regulatory framework, with the advocacy of the crypto industry and House Republicans.

“We’re guessing (defi activity) is rising rapidly and will soon become a large part of the transaction,” Ricardo said. “I’m worried about this bill, and I’m basically starting a global naval strategy and putting all my ships on Lake Superior when I know there’s a sea you don’t have covered.”

While many substantial issues related to the bill were discussed during Friday’s hearing, Democratic leaders like the Financial Services Committee have focused primarily on Republican rejections, with member Maxine Waters (D-CA). language Laws prohibiting President Donald Trump from engaging in his majority, Beneficial Crypto Ventures while in the office.

Meanwhile, Republican leaders on the committee focused their rebuttal on Friday on these Trump-centric debates rather than on issues raised about existing texts.

“Is this really a substantial conversation about the law at hand, or has it just evolved into another partisan practice?” asked at one point during the lawsuit, Rep. Mike Flood (R-NE), chairman of the Financial Services Subcommittee on Housing and Insurance.

Edited by Andrew Hayward