US has been at forefront of developing the Crypto solutions from the Crypto Exchanges to Crypto Wallet to Banks and Credit Unions getting involved in banking cryptocurrency. It would be safe to assume that the US holds most of the market capitalization of Crypto. According to McKensie, Global wealth accounted for $518 Tr out of which Crypto assets stood at $2 Tr that makes approximately 1% of the global wealth by the end of 2021 – with a conservative CAGR of 40% for Cryptocurrency development in 10 years – Crypto Market capitalization can go onto $50 Tr out of the total wealth of $964 Tr by the end of 2031 and that would account for 5% of the total wealth.
This shows that Crypto/Blockchain or Web 3.0 is an inevitable change, and it is important to bring in Crypto legislation for its further development.
This shows that Crypto/Blockchain or Web 3.0 is an inevitable change, and it is important to bring in new crypto legislation for its further development.
“Lummis-Gillibrand Responsible Financial Innovation Act”
Two US senators Cynthia Lummis and Kirsten Gillibrand came up with a Crypto legislation Bill that outlines the regulatory framework across digital assets. This framework will provide clarity to both the creators in this space and the regulators to stay aware of the boundaries and flexibilities. It will generate clear standards, jurisdictional boundaries, and most importantly consumer protection.
Let’s look at the major provisions within this Digital Currency Bill 2022.
“Benchmark for determining which types of digital assets are commodities and which are securities”
It will be assessed whether a digital asset is a security, or a commodity based on its purpose and the rights it gives to the consumer. This will precisely translate the regulatory obligations for enterprises that provide digital assets, as well as for regulators to execute commodities and security trading regulations.
Currently, there are no clear definitions for any Digital Asset; nevertheless, this bill establishes definitions that will allow new crypto legislation to be implemented in a consistent manner and ensure that all consumers are informed of the regulations that may affect them.
The Commodity Futures Trading Commission (CFTC) will have regulatory authority on digital asset spot markets
Given that most of the digital assets are more akin to commodities than securities, the bill also provides the CFTC complete power over eligible digital asset spot markets, which is consistent with the CFTC’s current authority over other commodity markets. The CFTC will regulate digital assets that fulfill the commodity definition, such as Ether and Bitcoin, which account for more than 50% of the market capitalization of digital assets.
Defines and establishes rules for stable coins to safeguard consumers and markets while also facilitating speedier payments
Payment Stable coins are gaining popularity and adoption, and when properly organized, might enable customers with faster and more secure payment options. For all payment stable coin issuers, Lummis-Gillibrand specifies 100 percent reserve, asset type, and full disclosure standards. This ensures that a payment stable coin holder can anytime redeem the stable coin for the corresponding dollar value, ensuring that its value is maintained, and customers are protected from various risks connected with stable coins. In addition, the measure establishes a comprehensive, optional structure for all credit unions and banks to issue payment stable coins. Moreover, the bill establishes a specific depository institution charter for payment stable coin issuance under state law and the National Bank Act, with adapted capital constraints and holding company oversight. All payment stable coin issuers are not required to become depository institutions under the bill.
Establishes an advisory body to formulate guiding laws, encourage regulatory agencies, and provide legislative guidance on rapidly evolving technology
The bill establishes an advisory committee made up of a wide range of stakeholders, that includes industry, advocacy organizations, federal and state regulators, and subject matter professionals in financial literacy, consumer safety, consumer education, and financial inclusion. The committee is essential for maintaining flexibility and responding to quick changes in the sector. It will continue to monitor the rapidly evolving industry and give suggestions based on the growth to ensure that US crypto regulations 2022 are effective.
Requires digital asset service providers to disclose information so that consumers are aware of the product and can make accurate decisions while using digital assets
For digital asset service providers, consumer education should be a top priority. The Lummis-Gillibrand disclosure rules for digital asset service providers guarantee that customers are aware of the products they’re buying, as well as their rights, and the risks associated with digital asset trading, such as digital asset lending and source code version variations.
Entails a study on the energy usage of digital assets
The bill mandates that the Federal Energy Regulatory Commission investigate and provide a report on energy expenditure in the digital asset market. Mining for virtual currencies, like other forms of mining, may be an energy-demanding process. It’s critical to take an in-depth look into this issue in order to discover the best methods to adapt this technology – assist us to achieve climate goals by utilizing clean energy and cutting energy waste.
Instructs the CFTC and SEC to examine and report on the self-regulatory organizations (SRO) growth and create a proposal for its innovation
SROs can assist regulators by allowing them to be more adaptable and effective and retain strict control. However, the creation and scope of this sort of industry needs to be established properly in order to achieve the desired objectives.
Manages the CFTC and SEC to check with the Treasury and the National Institute of Standards and Technology to create detailed guidance pertaining to cybersecurity for digital asset agents
The creation of robust cybersecurity standards must be prioritized as we learn more about how countries like Russia and China participate in bitcoin and other digital asset markets. The United States must take the lead in this regulatory endeavor to keep organizations and innovation onshore, as well as to ensure that the United States sets the cybersecurity criteria that regulate the industry. The bill also leads towards the appropriate regulators to learn more about the potential for sanctions evasion, terrorist financing, and money laundering, as well as to create rules governing threat identification and mitigation, appropriate cybersecurity standards, auditing, security operations, and penetration testing.
Establishes a regulatory sandbox in which state and federal authorities can collaborate on new financial technology
Innovation should be able to thrive in its infancy. Lummis-Gillibrand establishes a joint structure so that the federal and state regulators can co-operate with financial technology businesses and allow them to launch new products into the market on a limited basis. By doing so, regulators become more acquainted with financial technology products, as well as contribute to the financial literacy work and consumer education that is necessary to help consumers engage with the market in a safe manner.
Establishes a practical framework for the taxation of digital assets
With the increasing use and legitimacy of digital assets, it’s critical to make it easy for people to utilize them in their daily lives. The bill establishes a de minimis exception, allowing consumers to buy virtual currency without reporting their earnings. The bill also explains the tax treatment of various actors and actions when it comes to the digital asset business, including the fact that validators and miners are not considered “brokers” for tax purposes, and also that their rewards are not considered income until they are redeemed for cash.
Charges the Government Accountability Office (GAO) with conducting an examination of the possible benefits and risks of investing retirement funds in digital assets and reporting its findings to Congress, the Treasury, and the Department of Labor
Lummis-Gillibrand seeks to prevent limiting consumers’ access to this booming industry while also guaranteeing that investments can be made in a safe manner, given that a lot of Americans rely on the benefits of 401k plans for retirement savings.
Directs the Office of Management and Budget, in collaboration with the Cybersecurity and Infrastructure Security Agency, the Director of National Intelligence, and the Department of Defense, to implement an information security check on the Digital Yuan, China’s central bank Visit Us
Central bank digital currencies (CBDCs) are becoming more common, and the US must understand the national security implications of the digital yuan and the intentions of China to encourage its adoption globally.
Lummis Bill brings in all the angles required to set the new crypto legislation in the Digital Assets/Crypto services sphere. Several bills have already surfaced before, but this bill is very comprehensive and not only covers the Institutional side like SEC and CFTC but also looks to provide creators the required boundaries and flexibility. However, its implementation may still take some time as the whole ecosystem develops but it has started a healthy debate within the Govt and regulatory institutions. US has been at the forefront of the Crypto services and any crypto legislation in US may make a very huge impact on the crypto regulations around the world. It is important for all the Government Institutions to embrace a policy change in the future and for creators, it is important to provide the feedback that is practical and respect the rules and regulations provided by the Government.