Highlights of the latest U.S. cryptocurrency bill: classified regulation encourages bitcoin payments

Bipartisan Bitcoin legislation from Cynthia Lummis (R-WY) of the Senate Banking Committee and Kirsten Gillibrand (D-NY) of the Senate Agriculture Committee finally rolled out just months after the bill was announced.

The Responsible Financial Innovation Act, also known as the Lummis-Gillibrand Act, aims to encourage “responsible innovation” by integrating digital assets into existing law Providing a clearer framework for the crypto industry, which is unregulated and lacks common standards , the Act contains a total of 69 pages of detailed definitions and regulations.

SEC and CFTC: Watchdog

The bill calls for the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) to do most of the oversight, with the two lawmakers placing the crypto space once and for all under the umbrella of specific regulators.

The SEC will regulate digital assets classified as securities, while the CFTC will oversee those digital assets that are recognized as commodities.

The textual description of the bill will serve as the basis for assessors to classify digital assets.

The Lummis-Gillibrand Act proposes a review of the rights or powers of digital asset holders and the intrinsic purpose of the asset.

Under the Act, ancillary assets are intangible fungible assets that are offered, sold, or otherwise made available to persons in connection with the sale or purchase of securities by entering into an investment contract.

The legislation uses the Howey test to determine that ancillary assets offered to purchasers under investment contracts are not securities in nature.

An asset classified as a security must provide the holder with debt or equity in the business entity, the right to liquidate or receive interest or dividend payments from the business entity, a share of profits or income in the business entity “derived exclusively from others” entrepreneurial or managerial efforts” or any other financial interest in the entity.

Digital assets that are not fully decentralized and that benefit from the “startup and management” of project parties whose work determines the value of the asset, but are not debt or equity themselves, or do not generate profits or other financial Equity assets are not classified as securities as long as they file disclosures with the SEC twice a year.

The presumption that such ancillary assets are commodities can be appealed in court.

The legislation also grants the CFTC exclusive spot market jurisdiction over all fungible assets that are not securities, including ancillary assets. Trading platforms need to be registered with the CFTC to conduct trading activities and are subject to rules on custody, customer protection, protection from market manipulation and information sharing. The CFTC will be allowed to charge a small fee for digital asset trading platforms to cover the agency’s increased costs.

The CFTC’s mandate to oversee the spot market could help pave the way for a bitcoin spot ETF in the U.S., as much of the SEC’s arguments against it have to do with a lack of oversight of the spot market and trading platforms not cooperating with regulators.

The act also directs the SEC and CFTC to study and report on the creation of self-regulatory organizations (SROs) that can play a complementary role in working with regulators in emerging markets.

Finally, the Responsible Financial Innovation Act also requires the two regulators, in consultation with the Minister of Finance, to develop a comprehensive set of guidelines for digital asset intermediaries to consider their cybersecurity, including topics such as secure operations, risk identification and mitigation , sanctions evasion, money laundering and terrorist financing. These agencies are expected to set the rules for such cybersecurity standards.

energy

The Lummis-Gillibrand Act requires research into the energy consumption of digital assets.

The research will seek to identify the best ways to encourage innovation, while ensuring that these technologies work with the rest of society to help the world move closer to climate goals by deploying more renewable and clean energy and reducing energy waste.

This task will be the responsibility of the Federal Energy Regulatory Commission, which will conduct the study in consultation with the CFTC and SEC. One of its goals is to analyze the type and amount of energy used for crypto mining.

tax

As previously hinted by Senator Lummis, the legislation would provide a tax exemption for transactions of goods and services up to $200 in bitcoin payments. This measure encourages the use of digital assets as a medium of exchange. However, the Act states that, for tax-exempt purposes, all transactions that are part of the same transaction or a series of related transactions will be treated as a single transaction and therefore equivalent to one capital gains number.

The bill further declares that miners should not be considered brokers and that digital assets obtained from mining activities should not be considered income until they are converted into fiat currency.

In addition, the Lummis-Gillibrand Act also stipulates that digital asset lending agreements are generally not taxable events, similar to securities lending transactions, and stipulates that certain Decentralized Autonomous Organizations (DAOs) are commercial entities for tax purposes. However, this requires that the DAO must be established or prepared under the laws of the jurisdiction.

Finally, on the tax front, the bill requires the Internal Revenue Service (IRS) to study and clarify issues such as forks and airdrops, merchant acceptance of digital assets, mining and staking, charitable donations, and the legal characterization of Stablecoin as a liability.

401(K) Pension Plan

The Lummis-Gillibrand Act requires the Government Accountability Office (GAO) to analyze the opportunities and risks associated with pension accounts investing in digital assets.

GAO’s findings will be reported to Congress, the Treasury Department and the Labor Department.

consumer protection

To strengthen customer protections in the cryptocurrency market, the bipartisan bill would require digital asset providers to disclose information about their products, including source code versions and the legal treatment of each digital asset.

The act also grants individuals the right to retain and control the digital assets they own.

other conditions

The Lummis-Gillibrand Act also includes provisions for stablecoins, such as requiring issuers to hold U.S. dollars or U.S. dollar equivalents so that customers can redeem them at any time ; creating an advisory committee to observe and study the latest developments in the field and make recommendations for regulatory purposes Maintain timeliness; and clearly define different types and styles of digital assets and their associated technologies, markets and practices.

prospect

Senator Gillibrand told CNBC in a June 7 interview that she thinks the bill will have Senate support.

“Our goal is to ensure that the bill passes the review of the four jurisdictional committees,” she said. “It will take a long time to establish a regulatory framework for a new industry.”

Senator Gillibrand went on to say she hopes the bipartisan legislation will pass the Senate’s Banking, Agriculture, Intelligence and Financial Affairs Committee before it is sent to the Senate.

“These committees are only relevant to one part of the bill because they all regulate only one part of the industry,” she added. “Having met with most industry stakeholders and experts, we think the bill will have a lot of momentum. . We will work with them on a long-term basis to continue to improve this bill.”

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/highlights-of-the-latest-u-s-cryptocurrency-bill-classified-regulation-encourages-bitcoin-payments/
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