Summer of 2008, an anonymous figure by the name of Satoshi writes the first white paper on a digital currency that would be called, Bitcoin. 2010, the first public exchange lists Bitcoin as officially available to trade. 2022, crypto regulation is introduced into the United States Senate, outlining how to classify it, how to govern it, and even how to protect the consumer from another stable coin crash.
This week, in a move that will lay the groundwork for many years to come for the digitization of the American economy—Senators Cynthia Lummis and Kirsten Gillibrand came together in a rare bipartisan act of agreement to introduce the very first piece of legislation to the United States Senate.
The framework offers a way for the government to classify cryptocurrencies and establishes a regulatory body for them, namely the Commodities Futures Trading Commission (CFTC).
Now, why would the commodities regulatory body be the next warden of cryptocurrencies? Well, that’s because Democratic Senator Kirsten Gillibrand and the cryptocurrencies function and behave in a way more akin to commodities like gold or oil. This means that future projects would have to register with the CFTC instead of the infamous SEC or Securities and Exchange Commission.
What to Expect From Crypto Regulation
The new bill introduced by Senators Gillibrand and Lummis provides a roadmap to wider legislation. Amongst the incoming drafts, the bill would start by ensuring that retail investors are not charged fees or taxed by the government on digital transactions under $200.
The legislation also introduces a fail-safe plan to deal with another stable coin collapse should it ever happen again and how to prevent it from occurring again. Senator Lummis, a member of the Senate Banking Committee, the committee that oversees the Securities and Exchange Commission, elaborated on the new bill saying,
The “Responsible Financial Innovation Act” creates regulatory clarity for agencies charged with supervising digital asset markets, provides a strong, tailored regulatory framework for stablecoins, and integrates digital assets into our existing tax and banking laws,”
Highlights From The New Digital Bill
- Establishes the meaning of a digital broker to protect wallet providers and software developers from being pulled into specific tax requirements.
- The bill will not create a new regulatory body but sets up the framework to create one if the SEC and CFTC fail to take the industry under their wing.
- Projects would have to pay a fee to be watched and maintained by the CFTC—similar to the SEC—if crypto is classified as a commodity.
- A project sandbox where regulators allow smaller more experimental projects to conduct business on a limited scale and duration.
- Stablecoin disclosure requirements, where any project that has a stablecoin and actively trades it will be subject to additional regulatory procedures including financial transparency and the ability to cover at least 120% of its stablecoins.
Going Forward with Crypto Regulation
The great majority of this new legislation will be split up into sections throughout 2023. Because of mid-term elections, most of the political push will come in the months following the elections. It is expected in the last half of 2022 and throughout the calendar year of 2023.
One thing is for certain, there is great interest from the United States Senate in bringing regulation to the crypto community. Politicians on Capitol Hill know that blockchain technology is not going away with the passing of the tides and is only becoming more prominent in the financial actors.
As the number of Bitcoin and altcoin wallet holders continues to increase, we can expect the United States Congress to continue the push for a sturdier framework and guidelines. One way or another, crypto regulation is coming to America, and it’s coming to stay.