All around the world, regulators are trying to address the trillion-dollar elephant in the room: the digital assets market. Because crypto is a nascent industry that currently exists largely outside of legal frameworks, it’s still in murky waters, and those in the industry — and outside of it — seemingly want clear guidelines and clarity to move forward.
A proposed crypto bill, sponsored by U.S. Senators Cynthia Lummis, Republican of Wyoming, and Kirsten Gillibrand, Democrat of New York, aims to install guide rails around the digital asset space. The 69-page, bipartisan bill is comprehensive and addresses many corners of the crypto markets.
Some of the most notable aspects in the proposal include:
- Making crypto transactions that are $200 or less tax-free.
- Defining guidelines for differentiating cryptocurrencies as commodities or securities (most would fall under the commodity category, according to the bill).
- Backing stablecoins with a 1:1 monetary currency, moving toward “100% reserve, asset type and detailed disclosure requirements for all payment stablecoin issuers.”
- Granting the U.S. Commodity Futures Trading Commission exclusive spot market jurisdiction over cryptocurrencies defined as commodities.
- Marking the U.S. Securities and Exchange Commission and CFTC as the main watchdogs over the digital asset industry.
“The bill matters as it is a step in the right direction for legislation and definition of ‘crypto,’ what a ‘crypto asset’ is and what regulation will look like,” Nick Donarski, the founder and CTO of ORE System, told TechCrunch.
“But at the same time, the bill, like other crypto-related bills, would be more likely to be split up to garner enough support to get it passed.”
Giving power to the CFTC
“There’s a lot of color here and it’s quite exciting,” Ken Goodwin, director of regulatory and institutional affairs at Blockchain Intelligence Group, told TechCrunch. By granting the CFTC oversight of most digital assets, it’s setting a precedent and giving the agency more validation, he said.
Goodwin worked on Wall Street for over 20 years and has spent the last eight years in the blockchain space. Even with his background in both traditional finance and crypto, he said he’s surprised by the positioning of the CFTC in the proposed bill.
“I would never suspect [CFTC] actually being on the forefront of this; I thought the SEC would be the regulator for this,” Goodwin said. “Even if this bill doesn’t pass, people will look to the CFTC to provide guidance.”
Regardless, U.S. agencies need to come together and decide how they’re going to classify and treat digital assets, whether as a commodity, security or an intangible asset like technology, Goodwin said.
“This bill tries to do everything, which may be its biggest impediment,” Christopher LaVigne, co-chair of the crypto practice at Withers, said. “It also fails to adequately remedy the biggest regulatory issues facing companies in the crypto market: Whether or not digital assets should be regulated as securities. I do not think this bill will change the SEC’s stance on whether it considers digital assets as securities or walk back its regulatory efforts in this space.”
Is this bill a net positive for the crypto industry?
Although there are a number of steps left before the bill becomes a law (or doesn’t), other market participants are optimistic.
“For me, it’s helpful — they took a measured approach, one that I believe the industry will largely get behind,” Mark Fidelman, founder of SmartBlocks, told TechCrunch. “With clear rules, individuals and companies can now develop blockchain solutions and tokens within a framework. Venture capital funding should flow into the industry now.”
The bill addresses insufficient or vague regulations governing digital assets in the U.S., according to Gabriella Kusz, CEO of the Global Digital Asset and Cryptocurrency Association. Kusz feels it provides clarity that digital asset firms need to navigate the U.S. legal and regulatory environment.
“This is not to escape strong regulation, but to shift to a jurisdiction with clearer rules of the road,” she said.
Besides encouraging innovation, this bill would further bring crypto into the regulatory framework, which will help more financial institutions get comfortable investing in crypto as an asset class, Michael Rinko, venture associate at AscendEX, said. “Government has a vested interest in promoting safe innovation, and if done the right way, the crypto industry stands to reap enormous benefits from smart regulation.”
While it remains to be seen whether the bill — or parts of it — will be passed, the crypto industry can take solace that at least the current thinking is one of a measured and realistic approach, Fidelman said. “I can hear a big sigh of relief across the industry right now.”
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