Senators Introduce Cryptocurrency Regulatory Bill

We got a glimpse into the future of crypto regulation in early June 2022 when Republican Senator Cynthia Lummis, one of Congress' most vocal cryptocurrency advocates, and Democratic Senator Kirsten Gillibrand unveiled a bill on Tuesday that would establish new rules for cryptocurrency, and hand the bulk of their oversight to the Commodity Futures Trading Commission (CFTC).  The bill marks one of the most ambitious efforts yet by lawmakers to place clear rules on rapidly growing cryptocurrency markets.  Here are a few of the main points for the proposed legislation:

• The legislation provides that the CFTC, not the Securities and Exchange Commission, will play the primary role in regulating crypto products. The CFTC is generally seen as a friendlier regulator for cryptocurrency.  The SEC has typically found that crypto products must adhere to cumbersome securities regulations.

• ·      It would establish new rules for stablecoins, which are crypto tokens intended to have their value pegged to a fiat currency asset like the U.S. dollar. Stablecoins have been under significant pressure recently after a crash of TerraUSD.  The new bill would require stablecoin issuers to maintain high-quality liquid assets equal to the value of all outstanding stablecoins, and public disclosures of those holdings.

• ·      The bill would remove a requirement that crypto traders report gains or losses of less than $200 to the Internal Revenue Service.

The bill, which is entitled The Responsible Financial Innovation Act, is not expected to become law, but its framework will undoubtedly serve as a reference point for future debates about regulation of crypto markets.

Overall, the Bill is a favorable early step in the development of laws and regulations of crypto markets.