Rep. Bryan Steil on Digital Assets Market Structure Legislation

The Need for Digital Asset Market Structure Legislation

• 🎯 Legislation for digital assets market structure is crucial due to significant differences from traditional securities.
• 💡 The current regulatory regime makes it nearly impossible for projects to distribute tokens to a broad holder base.

Stages of Digital Asset Projects

• 🚀 Early phase involves founders, engineers, lawyers, investors, and community leads, with initial decisions on legal entity formation and financing.
• 💰 Financing typically comes from venture capital or grassroots fundraising through token distribution.

Digital Assets vs. Traditional Securities

• ⛓️ Digital asset issuances are largely permissionless and intended for capital raising and governance distribution, unlike traditional securities which are primarily fundraising transactions.
• 🧾 Most digital assets are native to a blockchain, recorded on a ledger, while traditional securities are often digital but custodied by large institutions.
• ⏱️ Traditional securities offerings can take up to a year (registered) or a couple of weeks (exempt), whereas crypto offerings can be near instantaneous.

Secondary Market Differences

• 🌐 Centralized platforms or decentralized protocols are used for digital asset trading, differing from traditional securities relying on dealers and brokers.
• ⏰ Traditional securities settle on T+1, while digital asset transactions typically settle immediately.
• 🌍 Digital assets trade 24/7 globally, unlike traditional securities which have set market hours.
• 🔍 The blockchain model for digital assets offers more visibility than the traditional securities model.

Challenges and Future Outlook

• 🧩 A one-size-fits-all approach may not work for digital assets, as they can be used for various applications like real estate titles, healthcare records, and identification.
• 🏛️ The testimony highlights the need for market structure legislation from Congress to address these complexities.