The long-awaited ““crypto bill” by Senators Cynthia Lummis and Kirsten Gillibrand will provide regulatory clarity to the cryptocurrency industry in the United States and extend powers to the CFTC and SEC to control and supervise digital assets.
The first draft of the Crypto Bill that will provide regulatory clarity to cryptocurrencies in the United States has been leaked.
The “crypto bill” proposed by Senator Cynthia Lummis of Wyoming and in which Senator Kirsten Gillibrand of New York has collaborated since early March, covers almost all sectors of the crypto industry, as reported by this media at the end of last month.
The leaked 70-page document notes that the law, which can be cited as “Responsible Financial Innovation Act”, seeks to bring cryptocurrencies and digital assets into U.S. law by classifying cryptoassets as commodities or securities, as applicable.
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Lummis' crypto bill leaves much of the oversight of crypto assets in the hands of the Commodity Futures Trading Commission (CFTC) and attributes certain powers to the Securities and Exchange Commission (SEC) to regulate the industry. According to their classification, cryptoassets will fall under the supervision of these federal regulators.
It is worth remembering that the SEC has been pursuing cryptocurrency regulation for some time now and that its current chairman, Gary Gensler, has been working on ways to increase its powers to regulate these digital assets appropriately, with the aim of minimizing the risks that exist in the industry for investors and consumers.
The United States is preparing to regulate cryptocurrencies
The pro-Bitcoin Republican senator from Wyoming wants the United States to regulate cryptocurrencies to meet the needs of the growing industry and its participants and to maintain the country's status as a global technology leader.
Federal regulators have been divided on how they should treat crypto assets, so Lummis is encouraging regulation that ensures investor safety and financial stability, but that does not undermine the development and innovation of cryptocurrencies.
Her collaboration with Senator Gillibrand, of the Democratic Party, demonstrates the senator's efforts to create a non-partisan regulatory framework that allows progress towards new technological advances of cryptoassets, while mitigating all the existing risks within this young industry.
Explaining Cynthia Lummis' crypto bill
Adam Cochran, partner at Cinneamhain Ventures, investor and blockchain enthusiast, points out that Senator Cynthia Lummis' crypto bill, in general, will give regulatory clarity to cryptocurrencies in the countryHowever, he remains somewhat cautious about the expectations of this new bill.
Cochran took to Twitter to explain the implications of the leaked Lummis-Gillibrand bill in a lengthy thread.
Another victory for cryptocurrency users
Cynthia Lummis and Kirsten Gillibrand’s crypto bill introduces changes to the definition of “bankruptcy,” which represents a victory for cryptocurrency users, Cochran explained. The Crypto Bill draft makes it clear that deposited assets will be returned to users and will not be liquidated, the expert noted on his Twitter account.
On the other hand, in their proposal, the senators raise the possibility that Payments and purchases in cryptocurrencies such as Bitcoin on a small scale, up to an amount of 200 dollars, are exempt from taxes with the United States Internal Revenue Service (IRS). This is in order to encourage and promote the use of cryptocurrencies as a means of exchanging value.
It does not make the situation of DeFi clear
Contrary to what Senator Cynthia Lummis promised in the months leading up to the publication of her first draft of the bill, the current crypto bill does not completely eliminate uncertainty that currently exists in the world of cryptocurrencies regarding regulation.
First, Cochran noted that the Lummis bill requires cryptocurrency exchanges, stablecoin providers, and DAOs (Decentralized Autonomous Organizations) to be registered entities in the United States, though the registration requirements set forth leave unclear language for decentralized finance projects (DeFi).
It also indicated that The proposed law could have implications for automated market makers or AMMs (Automated Market Makers), such as Uniswap and PancakeSwap. This is because the law states that anything that exchanges a digital asset meets the burden of being a digital asset exchange, which suggests that the Lummis Crypto Act would include AMMs in its scope.
Therefore, the expert points out that uncertainty in the DeFi world and its derivatives continues. In addition, as Bit2Me News explained, Senator Cynthia Lummis's bill proposal does not include the regulation of NFTs.
Stablecoins and compliance costs
In his thread, the cryptocurrency expert also detailed that Cynthia Lummis' crypto bill puts the supervision of exchanges and cryptocurrency trading platforms through the roof, which means a considerable increase in compliance costs for these platforms.
Supervision of issuers of stablecoins, which are pegged to the value of fiat currencies such as the dollar or other goods or assets, is also included in the crypto bill. Specifically, Cochran detailed that The draft law provides clear compliance requirements and penalties for stablecoin issuersAnd although these requirements are higher than expected, the rules are quite clear in this regard.
Cochran said the law gives depository institutions the right to issue stablecoins, which “is a good thing.”
SEC and Federal Regulators' Involvement in Crypto
As for regulators, the proposed law in question extends additional powers to many financial regulators, who will have the authority to investigate and advise on additional and future regulations in new areas of innovation within the industry, according to the draft law.
Cryptocurrencies such as Bitcoin and Ethereum will be under the supervision of the CFTC as they are considered commodities. Those that fit the Howey test will be securities before the SEC.
To some extent, having regulators unify their criteria for overseeing cryptocurrencies will help create a more robust and precise regulatory framework. However, it would also expand information sharing between federal and state agencies. For Cochran, in his personal opinion, this “stinks.”
A comprehensive approach to cryptocurrencies in the United States
Lummis and Gillibrand's draft crypto bill has reportedly already been submitted to the US Senate for consideration.
Perianne Boring, executive director of the Chamber of Digital Commerce, an organization created to promote the acceptance of the crypto and blockchain industry, noted that the Lummis-Gillibrand Act will help the United States realize the commercial and economic benefits of cryptocurrencies and their underlying technology, blockchain.
“The Responsible Financial Innovation Act is a fundamental and comprehensive start to establishing a national regulatory framework for digital assets”, said Go on.
On the other hand, the Crypto Council for Innovation also Indian that the proposed bill will shed light for lawmakers to bring greater regulatory clarity to the complicated and nuanced world of cryptocurrencies.
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