US Senators Discuss Highly Anticipated Bitcoin Bill

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On Tuesday, June 7, 2022, Cynthia Lummis, a Republican senator and rancher from Wyoming, and Kirsten Gillibrand, a Democrat senator and securities lawyer from Albany, New York, will introduce the Responsible Financial Innovation Act. This bill is a broad and comprehensive attempt to regulate bitcoins and other cryptocurrencies.

In Lummis’ words, the bill will “fully integrate digital assets into [the] financial system” and bring order to the crypto space.

This is no small feat and has taken many hours consulting with industry and mining representatives to produce legislation that Lummis says, “We hope hits the sweet spot between regulation that is clear and understood and does not stifle innovation.”

“We can’t overregulate,” adds Lummis. “If we overregulate, it [Bitcoin innovation] will go to other countries.”

The legislation will clarify the roles of the two existing regulators, the U.S. Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), and will clarify that miners are free from being broker-dealers.

The legislation builds on top of the current regulatory regime for assets without creating any more regulatory bodies.

“Even the regulators are waiting to see our legislation move forward,” says Lummis. Lummis is confident that they will demand as much clarity as possible.

Cleaning Up A Mess Of Existing Cryptocurrency Legislation

Part of the new bill’s mission is to clean up the existing mishmash of bills and legislation (more than 50) that apply to cryptocurrencies, including parts of the Infrastructure Investment and Jobs Act passed last year.

As noted here, “Washington’s efforts to oversee digital assets date back to the Obama administration but remain scatter-shot, rife with holes and overlapping jurisdictions.”

No New Agencies: SEC And CFTC Remain In Charge

Despite recent media coverage suggesting there would be a new advisory body to guide and oversee the legislation, Senator Lummis’ office assured Bitcoin Magazine that there are no new agencies in the bill.

According to a report in CoinDesk:

“The bill would lean on the Commodity Futures Trading Commission (CFTC) as the primary regulator for spot markets and futures, while leaving the Securities and Exchange Commission (SEC) as the supervisor of crypto the can be defined by the so-called Howey Test as securities — specifically, an asset that’s ‘being offered to fund a company in the same way stocks are offered to fund companies.'”

A report on the draft legislation also sees a more expanded role for the CFTC:

“Some details remain in flux, but at a high level the senators’ plan would give the Commodity Futures Trading Commission significantly more power than it currently has. The regulator would oversee trading in tokens that are commodities, such as Bitcoin. Its jurisdiction is currently primarily tied to derivatives.

“Meanwhile, the Securities and Exchange Commission would police coins that are used to raise money from the public like a stock offering would. It’s unclear whether those turf lines will satisfy some crypto diehards who want to free the asset class from the reach of the SEC’s onerous investor protections.”

The legislation would also exempt people from having to report and pay taxes when they make purchases using cryptocurrency if their resulting capital gains are $600 or less. Some argue that this would make it more appealing to use bitcoin to pay at a check-out counter.

Mining Is Covered Under The New Bill

As noted in her interview, Lummis hints that legislation will defer to states for how they will regulate bitcoin mining. She praises the ways in which miners can stabilize the grid by turning waste assets into productive assets.

Responding to a recent White House statement covered in Bitcoin Magazine, Senator Lummis shared,

“Digital asset miners are some of the most innovative players in this space. Wyoming has miners who hook up to natural gas flares to get energy that is often emitted into the atmosphere.

“Others are using solar and wind energy to power their operations. I would urge the White House to approach this with caution as to not stifle innovation with unnecessary regulations.”

Stablecoins Are Included

The bill will significantly increase oversight of tokens and stablecoins, according to Lummis. “Stablecoins will have to be either FDIC insured or more than 100% backed by hard assets.”

“It is a very comprehensive bill, it will be filed on June 7,” Lummis said in a recent interview. “It includes coins that are commodities, coins that are securities, it includes stablecoins, it includes a discussion about CBDCs [central bank digital currencies], consistent with what we heard earlier and a small nod to NFTs [non-fungible tokens].”

After the recent Terra Luna meltdown, there is increased interest in regulating stablecoins as both senators are well aware. “All the ups and downs of the market have confirmed why our regulatory framework is best,” Gillibrand said of the bill, “Actually, it emphasized the importance of getting this done now.”

Most reports on the new legislation don’t see it passing through congress before next year. The bill will be reviewed by at least three congressional committees before it is sent to Congress. Many members of Congress may be reluctant about entering this territory, especially with the November congressional elections.

An “optimistic” Senator Gillibrand told CoinDesk, “she expects to get Senate votes ‘next year at the latest.’

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