After months of ridicule, U.S. Senators Kirsten Gillibrand (D-NY), a member of the Senate Agriculture Committee, and Cynthia Lummis (R-WY), a member of the Senate Banking Committee, introduced the Responsible Financial Innovation Act that would redefine the U.S. government’s relationship with bitcoin and other cryptocurrencies.
The Lummis-Gillibrand Bill for short is the first major bipartisan attempt to create a comprehensive regulatory framework for digital assets in the US. recognizing digital assets as a legitimate part of the U.S. financial system, requiring regulators to study and clarify their positions on a number of issues.
“The Responsible Financial Innovation Act creates regulatory clarity for agencies responsible for overseeing digital asset markets, provides a sound and personalized regulatory framework for stable currencies, and integrates digital assets into our existing banking and tax laws,” the senator said. Lummis in a statement.
Specifically, the 70-page document contains provisions for resolving territorial disputes between the Commodity Futures Trading Commission (CFTC) and the U.S. Securities and Exchange Commission (SEC) by assigning the CFTC regulatory authority over spot markets. of digital assets that are not considered securities. The move would give more power to the derivatives regulator in areas where SEC President Gary Gensler said his agency should take the lead and formally introduce the term “digital assets” into the CFTC Stock Exchange Act passed in 1936.
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Other notable features include new requirements for cryptocurrency exchanges: a requirement that decentralized autonomous organizations (DAOs) be incorporated under the laws of a recognized jurisdiction; a call de-minimis exclusion of up to $ 200 cryptocurrency per transaction from a taxpayer’s gross income for payment for goods and services; and the exclusion of cryptocurrency assets from a taxpayer’s gross income until the extracted cryptocurrency is actually sold. The bill would also delay two years (until 2025) and amend the tax reporting requirements of cryptographic intermediaries approved last year as part of the bipartisan infrastructure package.
Notably, the bill includes a new cryptocurrency-specific interpretation of the Howey test used by the SEC to determine whether an asset is a security and a way in which assets that are considered securities can change their classification once they are sufficiently decentralized. While there is still a long way to go before such changes become law, the bill is stronger because Lummis is on the Banking Committee overseeing the U.S. Securities and Exchange Commission and Gillibrand is on the Agriculture Committee, which oversees the Commodity Futures Trading Commission (CFTC).
Following the collapse of the $ 60 billion TerraUSD / Luna stable currency ecosystem, the new project also aims to establish the fundamentals for banks and non-banks that issue stable currencies, digital tokens linked to some external asset such as the US dollar. or gold. In particular, the law would require a 100% reservation for stablecoin issuers. Lawmakers and other officials, including Treasury Secretary Janet Yellen, have stepped up calls for increased regulation of stable currencies since the collapse of TerraUSD, which has worsened several-week sales in the cryptocurrency market.
“The time has come for the U.S. Congress to act bipartisanly to identify national policy and formulate a broad, balanced framework tailored to the unique characteristics of the emerging value Internet. Lummis and Gillibrand legislation seeks to do just that,” he said. Former CFTC chairman Christopher Giancarlo Kraken chief legal officer Marco Santori called the legislation “reflective and comprehensive” in a statement, and Coinbase’s U.S. chief policy officer Kara Calvert called it “significant legislation to create regulatory clarity.” for digital assets “. However, before the bill was launched, 26 technologists issued a widely reported letter to Congress warning them to take a skeptical approach to crypto utopianism and resist the crypto lobby.
The joint effort was first announced in March 2022 at an event hosted by Politico in Washington, DC, when Lummis and Gillibrand revealed that they were working together. Both senators compete to turn their respective states into major cryptographic centers. Wyoming lawmakers have enacted several laws to accommodate cryptocurrency banks and decentralized trading platforms. In New York, Mayor Eric Adams tried to get the attention of cryptocurrencies by investing his first wages in bitcoins and ether.
Among other considerations, Lummis and Gillibrand also propose the creation of an advisory committee composed of industry experts, advocacy groups, and federal and state regulators to develop guiding principles for regulatory agencies and advise lawmakers on rapidly developing technology.
At the pre-publication press conference, Chris Land, Sen. Lummis’s general counsel, and Senator Gillibrand’s finance adviser, Arjun Ghosh, said their teams spoke with both the SEC and the CFTC, the offices of others. members of the Senate, including those. by Pat Toomey (R-Pa.), Mitch McConnell (R-KY) and Debbie Stabenow (D-MI), as well as several industry advocates and experts to finalize the language of the bill.