After last week’s rout, the crypto market turned mixed.
The price of bitcoin gained 1.6% and ethereum’s price budged a few basis points higher this week. Cardano
Meanwhile, this past Tuesday Republican Cynthia Lummis and Democrat Kirsten Gillibrand introduced what many call a “landmark” crypto bill. Named the Responsible Financial Innovations Act, the bipartisan legislation aims to finally clear up the biggest regulatory questions hanging over digital assets.
“The bipartisan Responsible Financial Innovation Act is a landmark bill that will establish a regulatory framework that spurs innovation, develops clear standards, defines appropriate jurisdictional boundaries and protects consumers. Importantly, the Lummis-Gillibrand framework will provide clarity to both industry and regulators, while also maintaining the flexibility to account for the ongoing evolution of the digital assets market,” said Senator Gillibrand
[Ed note: Investing in crypto is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Here’s a run-through of some of the key provisions in the legislation.
- The Responsible Financial Innovation Act seeks to classify digital assets into securities and commodities and regulate them accordingly. This will “give digital asset companies the ability to determine what their regulatory obligations will be and giving regulators the clarity they need to enforce existing securities and commodities trading laws.” For example, bitcoin and ether, which fall into the “commodity” bucket, would be regulated by the Commodity Futures Trading Commission (CFTC).
- The bill would lighten the tax burden for crypto holders and miners. Small purchases of up to $200 would no longer have to reported to he IRS, which would make transacting in crypto easier. It also “declassifies” miners as brokers seeking to exempt their holdings from taxation until “redeemed for cash.”
- On the anti-crypto side, Lummis and Gillibrand wants to eradicate algorithmic stablecoins that aren’t backed by “TradFi” assets, such as gold or fiat currencies. “Lummis-Gillibrand establishes 100% reserve, asset type and detailed disclosure requirements for all payment stablecoin issuers. This guarantees that a payment stablecoin holder can always redeem the stablecoin in exchange for the equivalent dollar value, which maintains its value and protects consumers from many of the potential risks associated with stablecoins,” the bill press release wrote.
The Responsible Financial Innovation Act is a landmark yet very early step in building a clear regulatory framework for crypto. The bill will have to survive a number of Senate hearings and debates before it can be brought up for a full vote.
Many political experts believe it has zero chance of going anywhere before the end of this year. And given its scope, there’s a high possibility that it will be heavily revised or split into smaller bills.
Still, Lummis and Gillibrand’s effort is shaping up to be one of the broadest—and largely pro-crypto—legislations to date, which is crucial for mainstream adoption of digital assets and their integration into traditional finance.
As Diogo Monica, the co-founder of institutional digital asset platform Anchorage, said in an interview with CNBC, “what is bad for crypto is no regulation and enforcement, and any kind of regulation, even strict, is welcome by the industry.
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