US Senators Proposed An Industry Friendly Bill For Cryptocurrency

On Tuesday, a bipartisan pair of U.S. senators, Republican Senator Cynthia Lummis and Democratic Senator Kirsten Gillibrand unveiled the Responsible Financial Innovation Act. The fundamental purpose of the legislation is to provide a comprehensive regulatory framework for digital assets. In a combined press release, senators said this bill would balance the crypto market’s need for safeguards and consumer protections and the ambition to foster financial innovation. 

Despite the industry’s increasing lobbying efforts to evade existing laws, senators introduced legislation that would create specific exemptions to federal law for various cryptocurrencies. Since taking office last year, Ms. Lummis has been the Senate’s most vocal proponent of cryptocurrency. Her 2022 financial disclosures stated that she had between $100,000 and $250,000 in bitcoin. 

Cryptocurrency lobbyists have long argued that the SEC’s regulation is costly and burdensome and that the agency has provided inadequate guidance on which assets qualify as securities under the law. Digital token issuers and trading platforms that allow investors to purchase and sell them have chosen not to register with the SEC, leaving them essentially unregulated. 

This bill seems like a crucial move for the crypto industry. But what are the key elements or highlights of this bill?

Below are among the fundamental components that would offer clarity to both industry and regulators while also keeping the flexibility to accommodate for the continued growth of the digital assets market.

• It offers needed legal clarity on handling customer holdings following the recent uproar over customers’ tokens being merged with an exchange’s assets if the company goes bankrupt.
• The Lummis-Gillibrand plan also incorporates language from a measure introduced last year to define the term “crypto broker,” intending to protect wallet providers, software developers, and others from being caught up in tax reporting requirements.
• The law does not create the self-regulatory organization that many in the sector have pushed for, but it requires a review by the SEC and CFTC and a proposal for its formation.
• Under this measure, crypto businesses monitored by the CFTC would be required to begin paying fees to fund the agency, similar to how the SEC is funded presently.
• The senators also propose a “sandbox” for the crypto business, in which regulators would allow companies to test innovative goods on a restricted scale and for a short time.
• The bill’s move toward 100% reserve, asset type, and complete disclosure requirements for all payment stablecoin issuers will be closely scrutinized in light of the recent, spectacular collapse of terraUSD (UST). Banks and credit unions would be entitled to produce stablecoins under a new structure, but they should not become depository institutions. 
• Companies that raise funds through digital asset sales must also make specific disclosures to the SEC according to the measure. 

The law aims to exempt various cryptocurrencies from the Securities and Exchange Commission’s jurisdiction, apart from other objectives. It would also introduce new concepts into the roughly 90-year-old securities regulations, allowing some digital token issuers to comply with fewer disclosure requirements than public firms.

Overall, this bill is one of the most ambitious attempts yet by politicians to put clear barriers around the rapidly growing and controversial cryptocurrency marketplaces. With the November elections just months away, the bill is unlikely to pass this session of Congress. Still, its configuration might serve as a starting point for future deliberations about best regulating those markets.

*The full text of the bill is available here,

Source –  (https://www.lummis.senate.gov/press-releases/lummis-gillibrand-introduce-landmark-legislation-to-create-regulatory-framework-for-digital-assets/)