Earlier today, Senators Cynthia Lummis and Kirsten Gillibrand revealed their bi-partisan legislation to apply regulatory clarity to the growing digital asset ecosystem in the US.
For years now, the crypto industry has desired bright-line rules to provide compliant offerings and regulated platforms, yet regulators have been hesitant to veer away from existing securities law – something that does not always easily apply to crypto which may be securities, commodities, a utility or all the above.
Ken Goodwin, Director of Regulatory and Institutional Affairs at Blockchain Intelligence Group, has provided his perspective on the legislation while expressing his skepticism as to whether or not the bill we become law.
Goodwin said the crypto bill proposed by Wyoming Senator Lummis and New York Senator Gillibrand called the Responsible Financial Innovation Act is substantial as it designates greater regulatory oversight to the Commodity Futures Trading Commission (CFTC) and reduces the Security and Exchange Commission (SEC) regulatory oversight of cryptocurrencies.
“Thus, it sets the groundwork for cryptocurrencies to be classified and treated as commodities rather than securities in most cases,” stated Goodwin. “This would reign in on how crypto exchanges, miners, and staking would be overseen here in the US and give research authority to the Federal Energy Regulatory Commission (FERC) to research the energy costs of these activities. It also makes the CFTC the main prudential regulator of cryptocurrencies by giving it the leverage to increase its human capital and staff financed by the cryptocurrency community. “
Goodwin added that crypto platforms will be less likely to be treated as exchanges and brokerages may have to report less information to the IRS:
“The key takeaways here are that it appears to be less investor and consumer protection risk-focused and more innovation and industry-building driven, allowing for banks and credit unions to create their own stablecoins competing against the CBDC,” Goodwin stated. “Lost in the backdrop of this proposed bill is the risk-based approach addressing consumer and investor protection as evidenced by knowing your transaction and product suitability risks seen in NFTs and DeFi products. It remains to be seen whether this bill will be passed. I believe the approach should encompass all major Dodd-Frank agencies.”