IOTA Advocates for Crypto Regulations That Encourage Innovation Rather Than Imposing Compliance Hurdles

The IOTA Foundation has been proactively collaborating with U.S. lawmakers to influence the development of digital asset regulations, stressing the importance of well-defined standards for utility tokens and regulatory approaches that encourage innovation. As the U.S. advances toward more formalized rules,

has provided input on major policy efforts, such as the Senate Banking Committee’s Responsible Financial Innovation Act and the Commodity Futures Trading Commission’s (CFTC) proposals for spot crypto asset listings. The foundation pushes for a clear distinction between utility tokens and securities, advocates for decentralized finance (DeFi), and calls for better coordination among agencies to minimize regulatory ambiguity.

In its submission to the Senate’s Request for Information (RFI), IOTA identified five key priorities for shaping the U.S. digital asset sector. These include opposing uniform token classification, supporting yield-generating stablecoins with strong transparency, exempting non-custodial DeFi platforms from intermediary rules, making innovation a core SEC objective, and establishing formal collaboration between the SEC and CFTC. The foundation maintains that utility tokens, which enable access or functionality within networks, should not be treated as traditional securities subject to strict financial oversight.

When responding to the CFTC, IOTA outlined five guiding principles for spot crypto asset listings. The foundation recommended a unified SEC-CFTC approach to classifying commodities and securities, standards that reflect the realities of decentralized systems, on-chain tools for regulatory monitoring, and streamlined listing procedures to prevent barriers for smaller innovators. It also called for clear public guidance and standardized templates to enhance trust in the listing process.

The U.S. regulatory environment is evolving in parallel with the European Union’s Markets in Crypto-Assets Regulation (MiCA), which began in July 2023. While both aim to increase transparency and reduce systemic risk, their focus differs. The U.S. GENIUS Act centers on payment stablecoins and federal regulation, whereas MiCA seeks to harmonize rules and licensing across the EU. IOTA points out that MiCA’s comprehensive technical requirements offer clarity but may be burdensome for compliance, while the U.S. approach centralizes oversight but leaves broader reforms for future discussion.

Meanwhile, the CFTC Global Markets Advisory Committee’s Digital Asset Markets Subcommittee has made progress in defining utility tokens as commodities. The group introduced a six-part framework to assess whether a token falls under CFTC jurisdiction, considering factors like immediate usability, governance features, and future access to services or products. They also suggested a self-certification process, a published list of approved utility tokens, and formal consultations between the CFTC and SEC to resolve jurisdictional issues.

IOTA’s policy efforts highlight the necessity of balanced regulation. The foundation warns that overly complex compliance could hinder innovation, especially for smaller ventures, and notes that fragmented enforcement has already cost U.S. firms over $400 million in legal expenses. By advocating for precise definitions and regulatory safe harbors, IOTA seeks to ensure that rules support both market stability and technological advancement.

With both U.S. and EU regulatory models in play, IOTA stresses the importance of flexible, internationally compatible standards. The foundation remains committed to working with policymakers to develop frameworks that are balanced, forward-looking, and conducive to responsible innovation. As the CLARITY Act and other reforms are considered, the next several months could shape the future of digital asset regulation in the U.S. and its influence on global markets.

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