Not to be left behind, the US is actively working on a bill to help control crypto crime and regulate the rising industry. The lengthy bill is up for scrutiny, but appears promising.
Last week, Senator Lummis (R-WY) and Senator Gillibrand (D-NY) introduced their highly-anticipated proposal for a new cryptoasset regulatory framework after first announcing their partnership back in March. The bipartisan bill is titled the Responsible Financial Innovation Act (RFI). Importantly, both of its co-sponsors also sit on two highly influential committees when it comes to crypto oversight. Senator Lummis is a member of the Senate Banking Committee, which is responsible for overseeing the Securities and Exchange Committee (SEC). Meanwhile, Senator Gillibrand is a member of the Senate Agriculture Committee, which oversees the Commodities Futures Trading Commission (CFTC).
Senator Gillibrand – who historically has not been as crypto-friendly as her co-sponsor Senator Lummis – stated in a press release: “The bipartisan Responsible Financial Innovation Act is a landmark bill that will establish a regulatory framework that spurs innovation, develops clear standards, defines appropriate jurisdictional boundaries and protects consumers.
“The Lummis-Gillibrand framework will provide clarity to both industry and regulators, while also maintaining the flexibility to account for the ongoing evolution of the digital assets market. I am proud to introduce this bipartisan bill with Senator Cynthia Lummis, who has been a passionate and engaged partner, and look forward to working alongside her to build support.”
The nearly 70-page bill text sets out to do a few specific things for cryptoasset regulation, most of which are focused on the jurisdictional responsibilities of the SEC and the CFTC when it comes to crypto oversight.
Firstly, the Responsible Financial Innovation Act establishes a defined framework for determining which cryptoassets are securities and regulated by the SEC and which are commodities and subsequently regulated by the CFTC. The bill makes this important determination by looking at the intended purpose of the digital asset as well as the powers or privileges given to consumers.
The Gillibrand official press release (but not the RFI bill text) specifically calls out both Bitcoin and Ether – which, together, comprise more than half of the total market capitalization of crypto – as being commodities under the bill’s framework and thus falling under CFTC’s jurisdiction.
The bill also outlines definitions for key terms including digital asset, digital asset intermediary, payment stablecoins (not to be confused with algorithmically-pegged stablecoins such as UST), and others. While definitions aren’t typically the most noteworthy or interesting part of a bill, many of these terms are not yet legally defined. Offering formal definitions is a crucial building block for the implementation of a clear and responsible regulatory framework for cryptoassets.
The subsequent sections of the bill get into the more substantive and influential aspects of the Lummis-Gillibrand framework for crypto regulation. Notably, the bill gives the CFTC regulatory oversight of the crypto spot market. The RFI act also outlines the regulatory framework for payment stablecoins. As noted in the press release, the bill mandates “100% reserve, asset type and detailed disclosure requirements for all payment stablecoin issuers.
This guarantees that a payment stablecoin holder can always redeem the stablecoin in exchange for the equivalent dollar value, which maintains its value and protects consumers from many of the potential risks associated with stablecoins. The bill also sets forth a detailed, optional framework for all banks and credit unions to issue payment stablecoins. The bill also authorizes a special depository institution charter under both state law and the National Bank Act for payment stablecoin issuance, with tailored capital requirements and holding company supervision. The bill does not require all payment stablecoin issuers to become depository institutions.”
Like stablecoin issuers, digital asset service providers are also mandated to follow disclosure requirements related to consumer education on the nature of the products, the risks associated, and what rights they have as consumers.
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