Regulation around crypto is far from final in the U.S., and some would argue that the path is just being paved. As crypto-focused bills are being introduced to Congress, there are a few the industry and regulators should keep an eye on, according to a new report by Prime Trust.
To date, Congress has introduced over 50 bills related to digital assets, blockchain technology and other policies within the crypto sector. But of those, three stand out: The Digital Commodity Exchange Act of 2022, the Lummis-Gillibrand Responsible Financial Innovation Act and The Digital Commodities Consumer Protection Act of 2022, the report stated.
The common mantra within the industry is ‘regulatory clarity.’ Jeremy Sheridan, VP of regulatory affairs, Prime Trust
“Based on industry discussions, those three seemed to have the most legislative momentum and were the most comprehensive,” Jeremy Sheridan, VP of regulatory affairs at Prime Trust, told TechCrunch.
While all three bills are different, each aims to have the Commodity Futures Trading Commission (CFTC) as the main regulator and overseer for cryptocurrencies, unless they are defined as securities, in which case they would remain under the purview of the U.S. Securities and Exchange Commission (SEC).
“Just having that primary regulator is really important,” Sheridan said. “It starts establishing the roles of the road.”
The CFTC and the SEC’s roles around cryptocurrency regulation have been somewhat blurred, as both organizations have tried to get involved, but each of these bills aim to provide greater clarity on that front, in addition to other areas.
Market players have said that U.S. agencies like these two have 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, TechCrunch previously reported. The definitions surrounding cryptocurrencies are still up in the air, even though some have been deemed securities.
For example, the SEC charged Kim Kardashian for “unlawfully touting” a “crypto security,” and the two settled the case with a $1.26 million penalty. SEC Chair Gary Gensler has been a vocal proponent of bringing crypto assets under existing securities laws, even if not everyone else agrees with him.
Separately, U.S. senator Cynthia Lummis, Republican of Wyoming, has been a vocal supporter of the crypto industry, and has contributed to new bills focused on the industry over the past year. Most recently, she joined forces with U.S. Senator Marsha Blackburn, Republican of Tennessee, to amend the Cybersecurity Information Sharing Act of 2015 to include cryptocurrency firms, TechCrunch exclusively reported last month.
“The common mantra within the industry is ‘regulatory clarity,’” Sheridan said. “We feel for more than just clarity […] We’re focused on the efficiency piece across the state, federal and international frameworks.”
But what could efficiency in crypto look like?
A standardized, universal approach, even when there are different tiers of regulatory requirements, Sheridan said. “There needs to be an intelligible, comprehensive map to empower the industry and allow builders clear guidelines and rules of the road, while removing obstacles for compliance teams.”
“I think there are positive considerations regarding bipartisan approach, and in terms of recognition that this is a requirement where legislative action needs to be taken,” Sheridan said. “There’s an eventual maturation of the industry, and all of these legislative approaches are necessary steps along the way to formalize and institutionalize digital assets.”
Even though the road for regulation looks long, Sheridan is still “very encouraged” about what lies ahead.
“Centralization or decentralization, regulation or deregulation, I think there’s a ‘spectrumed’ approach that can be achieved,” Sheridan said. “Some markets will be more regulated and centralized in nature, while others will have a stronger decentralized or deregulated element. Market entrants can make their own decisions about which protocols or platforms they want to engage with.”
In the long term, as there’s more institutional adoption and international growth within the crypto industry, there will also be more comprehensive, enabling approaches, Sheridan thinks.
“Regulators need to leverage this technology for innovation, financial inclusion and empowering the new digital economy, and so on,” Sheridan said. “Legislation will need to understand the benefits, and really give that wind to the sails of the industry, as opposed to looking for ways to confine it.”