Senators Cynthia Lummis and Kirsten Gillibrand presented a comprehensive bill to regulate the cryptocurrency space in the United States.
The bill, titled “The Digital Asset Market Structure and Investor Protection Act of 2023,” is a revised version of a similar bill submitted by senators last year.
The bill aims to provide clarity and certainty for crypto investors, innovators and regulators, as well as protect consumers and promote fair competition in the Bitcoin and crypto market. Here are three key takeaways from the bill:
- The bill will make it clear that crypto assets that do not represent a financial interest in the underlying project will be commodities, not securities. This means that if a token has no dividends or interest payments or ownership interest in the issuer, it will be regulated by the Commodity Futures Trading Commission (CFTC) and not by the Securities and Exchange Commission (SEC).
- The bill gives the task of regulating crypto exchanges like Coinbase to the CFTC, not the SEC. The bill will require crypto exchanges to register with the CFTC and abide by their rules and regulations, including strong client protections such as segregation of client funds and periodic reporting of proof of reserve.
- The bill would allow stablecoins to be issued by regulated depository institutions (banks or credit unions). The bill would require stablecoins to be backed 1:1 by high-quality liquid assets such as cash or government bonds.
The bill will also prioritize existing stablecoin issuers in obtaining new licenses from the Office of the Currency Controller (OCC), which oversees national banks.
The bill's sponsors said their legislation would provide a clear and consistent framework for crypto regulation in the US, which is currently fragmented and unclear. They also said that their bill would encourage innovation and growth in the crypto industry, while protecting investors and consumers from fraud and manipulation.
While it may seem dubious that the bill will pass this term given the conflicting priorities of the divided Congress and the Biden administration, the bill is currently helping crypto exchanges advocating SEC sanctions lawsuits. Because it reaffirms that it is Congress, not the SEC, that has the power to determine how crypto is regulated.
*Not investment advice.