U.S. Senator Proposes “Cryptocurrency Bill”: A Comprehensive Solution to the Uncertainty of Crypto Financial Regulations

U.S. Senators Cynthia Lummis and Kirsten Gillibrand on Tuesday introduced a bipartisan cryptocurrency bill, the ” Responsible Financial Innovation Act,” seeking to build a comprehensive set of digital asset regulations in the U.S. Industry lobbyists have content to debate.

Their bill would make cryptocurrency transactions less than $200 tax exempt, free small cryptocurrency purchases of goods and services from onerous taxation, and pave the way for cryptocurrency to act more like a “currency.” Additionally, as expected, the proposed legislation would give the U.S. Commodity Futures Trading Commission (CFTC) new powers and status.

The legislation seeks to address the biggest questions about digital assets, creating new federal laws for stablecoins, micropayment taxation and regulatory jurisdiction, addressing the uncertainties preventing this financial sector from maturing.

In Washington, however, the legislative proposal is seen as a starting point for a conversation with no major conclusions until next year. In addition, there are many cryptocurrency bills waiting to be discussed, including Senator Pat Toomey.

The latest proposal may have to be broken up into parts in 2023 to be discussed within the various relevant congressional committees in the next session. Cynthia Lummis is a member of the Senate Banking Committee, which oversees the Securities and Exchange Commission (SEC) , and Kirsten Gillibrand, who sits on the Agriculture Committee, which oversees the Commodity Futures Trading Commission (CFTC), are well-positioned to help push key parts of the legislation.

Cynthia Lummis says:

The Responsible Financial Innovation Act creates regulatory clarity , provides a robust, tailored regulatory framework for stablecoins, and integrates digital assets into our existing tax and banking regulations.

Here are the main points of the proposed set of legislation:

  • Defining the category between crypto -securities and commodities allows token issuers to know in advance that their project is based on “ the purpose of the asset and the rights or powers it conveys to consumers.” The market set out in the bill is dominated by commodities, including bitcoin, ether, and other tokens with high market capitalization, which will be defined as “ancillary assets” regulated by the CFTC.
  • Lawmakers will give the CFTC authority over the spot market for crypto commodities, which would give the CFTC new powers. The agency currently does not have much jurisdiction over the cryptocurrency spot market.
  • The proposed legislation would also give the necessary clarity on how to handle client assets, especially if the company goes bankrupt but the client is linked to the exchange’s assets. Recently, the cryptocurrency exchange Coinbase mentioned this possibility in a filing with the SEC , causing market doubts. The Biden administration has hinted that there should be better hosting arrangements.
  • The bill also adopts language from a proposal put forward last year that sought to clarify the definition of a “cryptocurrency broker ,” specifically looking to protect wallet providers, software developers and other organizations from certain tax return requirements .
  • The bill doesn’t automatically create self-regulatory organizations like many industries do, but requires the SEC and CFTC to study it.
  • Cryptocurrency operators overseen by the CFTC must start paying the authorities, similar to the current funding support for the SEC.
  • The senator also suggested building an industry “sandbox” in which cryptocurrency industry players can test new products on a limited scale and deadline.
  • Due to the recent collapse of the TerraUSD (UST) stablecoin, one of the proposals in this bill is to require stablecoin issuers to have 100% reserves and declare asset types and details. In the future there will be a new structure for banks and credit unions to issue stable coins.
  • The bill also requires companies raising funds through digital asset sales to make certain disclosures.