Four Bills That Could Solve Crypto Regulation Issues in the U.S.

The U.S. is working on four bills to fill the crypto industry’s regulatory void and make America great again. The recent regulatory actions of the Securities and Exchange Commission (SEC) and the Commodities Futures Trading Commission (CFTC) created a hostile scenario for the crypto industry to survive. These bills could help in salvaging the situation. 

The Regulatory Void for Crypto in the United States 

Crypto companies operating in the United States face a severe regulatory clarity issue. The agencies need to provide a clear and walkable path for these entities. Instead, they have taken regulatory actions against the majority of them in the name of violating securities, laws, etc. 

After events like the Terra Ecosystem collapse and the FTX saga, the regulatory actions by the SEC against crypto entities surged by 183%. The infamous case of SEC vs. Ripple can be considered a textbook example of regulatory obscurity. But the lawmakers have considered these issues and are bringing four bills to fill the void. 

Four Digital Assets Bills that Can Make America Great Again

To leverage the full potential of crypto, its adoption must reach the optimal level. It should indulge retail and institutional investors but this would require regulatory clarity. Since 2022, over 50 digital asset bills have been introduced in Congress to police everything crypto. 

Most of them failed to pass the initial tests, and now only 4 remain standing, and the crypto industry has its fingers crossed. These include the Financial Innovation and Technology for the 21st Century Act (FITCA), the Responsible Financial Innovation Act (RFIA), the Digital Asset Market Structure Bill (DAMS), and the Digital Commodity Exchange Act (DCEA). 

The Financial Innovation and Technology for the 21st Century Act

The Financial Innovation and Technology for the 21st Century Act (FITCA) was introduced on July 20, 2023. It tries to classify digital assets into commodities and securities, clarifying the jurisdiction of the SEC and CFTC. It provides greater power to the CFTC by rebranding crypto previously classified as securities to commodities. 

It also provides clear guidelines for future crypto projects and existing projects. It also helps budding startups in the crypto realm by providing more precise guidelines. 

The Responsible Financial Innovation Act (RFIA)

RFIA, also dubbed the Lummis-Gillibrand Bill, clarifies the roles of the SEC and CFTC. Instead of placing one above the other, it pushes them to work together to police the crypto realm. At the same time, the taxation part of these digital assets will be covered by the Federal Reserve. 

It would only allow depository institutes to issue stablecoins and make room for decentralized autonomous organizations (DAOs) to be a part of the tax code and commission advisory committees. This will thereby invite regular reports on the industry. DAOs include a significant part that could have moved offshore to other tax havens. 

Digital Asset Market Structure Bill (DAMS)

Introduced on June 1, 2023, DAMS also aims to clarify crypto-related roles for the SEC and CFTC. It also has measures to classify securities and commodities. As per the bill, crypto tokens must undergo certification with the SEC to prove it’s sufficiently decentralized to be called a commodity. 

Moreover, crypto exchanges could be registered with the SEC as an Alternative Trading System (ATS). The regulator will not have the authority to deny registration only because it trades digital assets. The clarified ATS rules would allow digital commodities and stablecoins to be traded on ATS platforms. 

Digital Commodity Exchange Act (DCEA)

It was first introduced in September 2020, and its updated version was reintroduced in April 2022. The amendments included the option for stablecoin issuers to register as a ‘fixed-value digital commodity operator’ only if they meet specific requirements. It empowers CTFS to register and regulate spot exchanges. 

These spot exchanges will be treated similarly to other commodities exchanges. Moreover, cryptocurrencies not labeled as securities would be called digital commodities under the CFTC’s purview. At the same time, the SEC would look after the securities part. Crypto projects could voluntarily register with the CFTC to publicly trade and list their assets on an exchange. 

Instead of bringing multiple legislations, the United States should follow in the footsteps of the European Union. E.U.’s Market in Crypto Asset (MiCA) is a comprehensive regulatory framework for the whole block. A similar unified bill would bring much more clarity. Still, these four bills under process are a step in the right direction. 

Nancy J. Allen is a crypto enthusiast and believes that cryptocurrencies inspire people to be their own banks and step aside from traditional monetary exchange systems. She is also intrigued by blockchain technology and its functioning.

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