Senator Lummis’ crypto bill released

The bipartisan crypto bill by Senators Cynthia Lummis and Kirsten Gillibrand was unveiled in the US yesterday. 

Today, I’m introducing the Responsible Financial Innovation Act alongside @SenGillibrand. The United States is the global financial leader, and it’s absolutely critical the U.S. plays a leading role in this new frontier. https://t.co/PziuTwn8Wd

— Senator Cynthia Lummis (@SenLummis) June 7, 2022

Senators Lummis and Gillibrand present new bill for the crypto market

The bill addressed in particular the jurisdiction of the CFTC and the SEC, the regulation of stablecoins, the banking sector, the tax treatment of digital assets, and inter-agency coordination. The aim is to integrate digital assets into the current legal framework, to provide certainty to the growing crypto sector and protect consumers with flexibility, innovation and transparency. 

The new law would be called the Responsible Financial Innovation Act, and will create a comprehensive regulatory framework for digital assets that should encourage responsible financial innovation with the most substantial and comprehensive attempt to provide certainty and clarity to the crypto and blockchain industry in the US.

The Responsible Financial Innovation Act, also known as the Lummis-Gillibrand Act, creates a clear standard for determining which digital assets are commodities and which are security, making a clear distinction between these two different types of digital assets. 

It then creates clear definitions, and assigns regulatory authority over spot markets to the CFTC, since most digital assets are considered similar to commodities. 

The official statement explicitly states: 

“Digital assets that meet the definition of a commodity, such as bitcoin and ether, which comprise more than half of digital asset market capitalization, will be regulated by the CFTC”.

This means both that Bitcoin and Ethereum will continue to be considered, without question, commodities, and that the SEC will have no authority over them on spot markets. It will, however, continue to have it over securities and perhaps over derivatives. 

In addition, the bill defines and creates requirements for stablecoins, such as 100% reserves, and detailed disclosure requirements for all issuers. 

The main aspects covered by the bill

It also obliges crypto exchanges to disclose the risks of producing losses with cryptocurrency investments, and grants consumers the right to hold their own digital assets.

An advisory committee is also created to develop guiding principles, hold regulatory agencies accountable, and advise legislators on this rapidly developing technology. 

Precise disclosure requirements are also imposed on providers of services related to digital assets to ensure that consumers understand what they are purchasing and can make informed decisions. 

The bill also asks the Federal Energy Regulatory Commission to analyze and report on the energy consumption of the crypto sector, to study the problem and find the best way to exploit this technology. 

It also asks the CFTC and SEC to consider creating a self-regulatory organization (SRO) that can work with regulators to enable them to be more agile and efficient. 

Establishes a regulatory sandbox for state and federal regulators to collaborate on these innovative financial technologies. 

It creates a sustainable structure for the taxation of digital assets, with a minimal exemption to make virtual currency purchases without having to account for and report revenue. 

It also mandates the CFTC and SEC to consult with Treasury and the National Institute of Standards and Technology to develop comprehensive guidance for digital asset intermediaries, based on cybersecurity principles.

Finally, it instructs the Government Accountability Office (GAO) to conduct an analysis of the potential opportunities and risks associated with investing retirement savings in digital assets, and the Office of Management and Budget to conduct a study on information security on the digital yuan.