The Crypto Regulation Development in U.S. Congress
One thing that has been ignored for quite some time now amid the crypto headlines of plummeting and recovering prices, the vanishing liquidity of some crypto firms, and the enforcement by U.S. regulators is the rising number of crypto bills in the U.S. Congress. The crypto bills have been gaining momentum steadily, with nearly 50 digital asset bills and resolutions being proposed in the last year alone. There is also President Biden’s March executive order to create a legal framework for crypto to consider. Let’s look at some recently proposed legislation,
In early August, Sens. Debbie Stabenow (DMI) and John Boozman (R-AR) introduced a bill that recognises both BTC and ETH as digital commodities. The bill bestows the jurisdiction of these “digital commodities” to the Commodity Futures Trading Commission (CFTC). It defines the term to broadly capture potentially more than just the leading cryptocurrencies. The Digital Commodities Consumer Protection Act would form federal standards for crypto commodity trading and state how crypto commodity spot markets should function. As of now, the bill has been welcomed by most of the crypto industry, along with consumer groups.
Kirsten Gillibrand (D-NY) and Sens. Cynthia Lummis (R-WY) introduced a bill in June, which they stated was a complete regulatory framework for digital assets. This Responsible Financial Innovation Act would categorise many cryptocurrencies as commodities; have tax emotions for crypto transactions up to $200 and the block rewards for miners; demand stablecoins to be fully backed by high-quality liquid assets, say U.S. dollars; and urge the Treasury Department to study potential use-cases of DeFi. The crypto industry was largely in favour of this bill. Sheila Warren, Crypto Council for Innovation CEO, stated the bill could help the U.S. maintain its role as a global innovator.
Two other bipartisan bills focused on stablecoins and crypto transaction taxes are in the legislative pipeline. Sens. Pat Toomey (R-PA) and Krysten Sinema (D-AZ) proposed a bill that would exempt crypto transactions under 50$ from capital gains taxes. In the meantime, House Financial Services Committee Chairwoman Maxine Waters (D-CA) and Ranking Member Patrick McHenry (R-NC) is mediating a bill that would establish federal oversight of stablecoins, which has now been delayed until September. While the intricacies are yet to be clarified, the bill will potentially provide a path for nonbanks and banks to become regulated stablecoin issuers. Approved firms will also need to back stablecoins fully with highly liquid assets like cash or short-term government debt.
These bills are considerably important since, over the last several weeks, we have seen headlines about the SEC’s allegations that specific cryptocurrencies are securities or read about the U.S. Treasury Department sanctioned a virtual currency mixer called Tornado Cash. A mixer improves privacy while transacting; it is a neutral piece of code, which can be required, for example, to support specific causes securely. The details in each instance are different and have been criticised as regulation by enforcement or resolving regulatory questions through litigation rather than the typical rulemaking process that engages with the public and experts. We are yet to witness crypto regulation development in the U.S. and worldwide.