The US midterm elections are about to take place and will determine the country's next Congress. Do you know which cryptocurrency-related legislations were debated on Capitol Hill this year?
Blockchain analytics firm Chainalysis has published a report reviewing cryptocurrency regulations debated in the US Congress in 2022, setting a precedent for crypto legislation in the country.
According to the firm, These legislations were focused on providing regulatory clarity to the growing cryptocurrency industry., as well as granting authority to regulatory organizations to exercise control and oversight over the crypto industry and its various activities. The legislations also focused on regulating stablecoins, in response to the stablecoin report released by the President's Task Force on Financial Markets in November last year, and on providing tax clarity for crypto assets and ensuring national security.
While some US lawmakers remain skeptical of cryptocurrencies, others are looking to the future and have focused on delving deeper into the crypto industry, to address regulatory gaps and ensure greater stability for investors, while increasing confidence in the crypto market and contributing to its growth and expansion.
Some of the cryptocurrency regulations debated on Capitol Hill this year are listed below.
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Cryptocurrency regulations debated in the United States
According to the report "The Opportunity Before Congress on Crypto Legislation”Chainalysis,” the crypto bill introduced by US Senators Cynthia Lummis and Kirsten Gillibrand in June 2022, opened the debate on crypto regulation and policy in Washington.
The Lummis-Gillibrand bill, titled the “Responsible Financial Innovation Act (RFIA),” was designed to create a comprehensive regulatory framework for cryptoassetsThis bill addressed the classification of cryptocurrencies, making a distinction between those that act as commodities and those that classify as securities. In addition to this, the bill highlighted the role of the US Commodity Futures Trading Commission (CFTC) as the primary body that should regulate the cryptocurrency spot market in the country.
Other points addressed in the crypto bill by Senators Lummis and Gillibrand were the regulation of stablecoin issuers and the classification of decentralized autonomous organizations (DAOs) as commercial entities in the country, among other things.
With this bill, the US senators expressed a broader vision of the great promise offered by cryptocurrencies and Web3, while noting the need for greater oversight over these digital assets to ensure that Americans can participate in the crypto ecosystem safely.
Chainalysis noted that the need to regulate the crypto industry has led to a number of cryptocurrency legislations that were widely discussed and debated in Congress this 2022.
Regulatory clarity in the crypto industry
Digital Commodity Exchange Act (DCEA)
The Digital Commodity Exchange Act (DCEA) was presented in April of this year as a regulatory project for Establish a new reporting regime for financial service providers with cryptoassetsCongressman Glenn Thompson, the main proponent of this bill, said it sought to close the regulatory gap that exists in the crypto industry, in order to promote innovation and technological development.
Thompson’s bill called for crypto companies to register with the CFTC. Additionally, the regulatory proposal limited the Securities and Exchange Commission’s (SEC) authority over digital assets that do not qualify as securities and that fall under the CFTC’s jurisdiction.
Digital Consumer Products Protection Act (DCCPA)
This bill, introduced in August by Senators Debbie Stabenow and John Boozman, sought Granting the CFTC the authority to oversee and regulate the cryptocurrency spot market.
Unlike DCEA, the Digital Products Consumer Protection Act (DCCPA) focused on defining the CFTC's jurisdiction in the crypto market, in order to force companies that act as a digital commodity platform to register with the regulator. On the other hand, the DCCPA did not classify crypto assets and left it up to the SEC to decide which cryptocurrencies comply with US securities laws.
Monitoring the stablecoin market
Stablecoin Innovation and Protection Act of 2022
La Stablecoin Innovation and Protection Act of 2022 It was introduced in February of this year by Congressman Josh Gottheimer, with the aim of define stablecoins and establish appropriate protections for consumers and investors participating in this crypto sector.
On his website, Congressman Gottheimer explained that his bill sought to define stablecoins as a cryptocurrency redeemable one-to-one for U.S. dollars, issued by a qualified issuer, either an insured depository institution or a qualified non-bank stablecoin issuer.
This bill placed the Office of the Comptroller of the Currency (OCC) in charge of overseeing the stablecoin market, and also included the U.S. Federal Deposit Insurance Corporation (FDIC) to administer a stablecoin insurance fund, which would manage the insurance of reimbursement payments from non-bank issuers. All of this was included in the bill in question with the aim of helping investors and markets protect themselves against systemic risk from stablecoins, as well as fraud and illicit financing.
Stablecoin Transparency Act
In March, a month after Congressman Gottheimer's bill was introduced, Senator Bill Hagerty introduced the Stablecoin Transparency Act, as a regulatory project focused on require stablecoin issuers to hold all reserves associated with their stablecoins in fiat currencyIn addition, the bill required stablecoin issuers to report on the status of their reserves on a monthly basis, through an external audit.
Tax breaks in the crypto industry
Virtual Currency Tax Equity Act
La Virtual Currency Tax Equity Act was introduced in Congress in March of this year by Congresswoman Suzane DelBene. Through this regulatory proposal, the congresswoman sought exclude personal cryptocurrency transactions of up to $200 from gross income tax return for income tax.
In July, Senators Patrick Toomey and Kyrsten Sinema introduced a similar bill, but limiting the tax exemption to a maximum of $50 for transactions with crypto assets.
The opportunity of cryptocurrencies in the US Congress
With this series of cryptocurrency regulations, and more that have been introduced, the upcoming US Congress has a lot to discuss regarding the crypto industry. While not all bill proposals will be a priority, Chainalysis believes that the debate over the authority of the CFTC and SEC over the crypto market and oversight of stablecoins could be addressed more quickly in the coming months.
While the classification of cryptocurrencies is critical to their regulation, there is currently a lot of debate about it. While the CFTC considers Bitcoin and Ethereum to be commodities, the SEC believes that perhaps the only cryptocurrency that could be exempt from securities laws is Bitcoin. This has led to great uncertainty in the crypto industry, preventing companies from developing new products for fear of regulatory consequences that may arise in the future.
On the other hand, in relation to stablecoins, Chainalysis detailed that the regulatory proposals that exist for stablecoins have gained greater strength since the incident that occurred with Terra in May. The collapse of the algorithmic stablecoin Terra USD (UST) caused the loss of billions of dollars of investors and at least three crypto companies declared bankruptcy, which has raised alarm bells for regulators around the world, not just in the United States.
Regulation as the main driver to boost crypto adoption
Chainalysis also noted that, in relation to tax breaks in the crypto industry, this has been a somewhat absent topic in Congress. However, it is possible that the reporting requirements mandated by the Internal Revenue Service (IRS) will be a reminder of the unequal treatment that cryptocurrencies receive, bringing the topic of tax breaks to the table for discussion.
The blockchain analytics firm also said that the potential approval of cryptocurrency regulations related to tax breaks will help boost the use and adoption of crypto assets, allowing Americans to use them more widely in their daily transactions.
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