A Quick Look at the Comprehensive U.S. Regulation of the Crypto Asset Sector – Lummis-Gillibrand Bill

In the past two days, a comprehensive US Senate legislative document on encrypted assets has been circulated on the Internet, from Senators Kirsten Gillibrand and Cynthia Lummis, and the name of the bill is tentatively set to be “Lummis-Gillibrand Crypto Bill”. The 67-page document covers crypto assets, taxation, distribution of regulatory power, crypto asset exchanges, consumer protection, stablecoins and banking, DeFi, and more. Of course, the document has not yet passed the two chambers, and may be further revised in the future, but we might as well take a brief look at the current overall regulatory framework and logic for encrypted assets in the United States.

1. The Act formally defines a Payment Stablecoin, which must be (1) redeemable for U.S. dollar fiat currency or other countries’ fiat currency at any time (2) issued by a commercial entity (3) in one or more Financial assets, but not cryptoassets backed (4) Stablecoins intended as a medium of exchange. Under this definition, USDT and USDC can be counted as payment-based stablecoins, but on-chain collateralized stablecoins such as Dai and algorithmic stablecoins will not be considered as payment-based stablecoins.

2. Comprehensive regulations have been made on the taxation of encrypted assets. For example, tax the use of crypto assets to purchase goods and services, and require the Ministry of Finance to tax forks, airdrops, mining, staking, etc. accordingly.

3. Require the U.S. General Accounting Office to submit a report by March 2023 examining the pros and cons of incorporating crypto assets into U.S. pensions, the associated asset allocation recommendations, risks, and required investor education and training.

4. In the US Securities Exchange Act (SEA), a new concept was introduced – Ancillary Assets, that is, assets with no voting rights, no dividend rights, no debt or stock, no liquidation rights and other financial rights. By this definition, traditional native tokens such as Bitcoin and Ethereum would fall into this category. The bill will make detailed provisions on the disclosure of information by issuers of ancillary assets.

5. The concept of encrypted assets was formally introduced in the United States Commodity Exchange Act (CEA). According to the current definition, most tokens without dividends and control rights (including Bitcoin and Ethereum, etc.) will be classified as commodities and regulated by the U.S. Commodity Futures Trading Commission (CFTC).

6. The regulation of crypto asset exchanges has been tightened across the board. Including the exchange must submit an application to the CFTC and be approved, the exchange cannot provide any derivative services involving encrypted assets, and can only provide trading services for those encrypted assets that are not controlled. Purpose, creation method, consensus method, management structure, distribution of holders, functions and other factors. Crypto assets held by exchanges and belonging to customers must be managed separately from self-held assets. It is strictly prohibited to use the encrypted assets or legal currency assets hosted by customers for other purposes. The firewall of the system must be established, and it must have a good financial situation and management ability. Etc., etc. . .

7. A large number of new provisions have been revised in terms of consumer protection, including prior information disclosure, soliciting consumer consent, source code related to encrypted assets, repeated mortgage and lending of encrypted assets, etc.

8. Allow banks and savings banks to issue their own payment stablecoins, but they must be 100% collateralized by high-quality liquid assets (such as reserves or U.S. Treasuries). At the same time, in order to maintain competition in the industry, non-depository institutions are also allowed to apply to become savings institutions and then issue their own stablecoins. This seems to mean that the managers of USDT and USDC need to apply to become depository institutions.

9. Ask the Federal Reserve and the Office of the Currency to study the risks posed by blockchain to thrift institutions. The bill specifically mentions that Congress believes that blockchain settlements are far faster than traditional settlements, which could lead to a shift in payment settlements to the crypto-asset space.

10. Within 1 year after the promulgation of the Act, the Ministry of Finance, CFTC, and SEC need to jointly submit a report to analyze the current status of DeFi development in the United States and other countries around the world, DeFi opportunities and challenges, DeFi rates and liquidity, and transparency. and security.

In general, the regulation of encrypted assets follows the American saying “walks like a duck, quacks like a duck, that is a duck”, and regulates different types of encrypted assets according to the traditional financial assets that are most similar to them. Although the regulations seem strict, they also leave room for innovation and competition. There are two interesting points. One is that the regulation of algorithmic stablecoins has not been mentioned yet.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/a-quick-look-at-the-comprehensive-u-s-regulation-of-the-crypto-asset-sector-lummis-gillibrand-bill/
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