Republicans and Democrats have struggled to reach a consensus on crypto. But a bipartisan bill may soon be introduced in the Senate, and it would dramatically overhaul regulation of the industry.
Barron’s has obtained a draft of the bill, which contains substantial changes from a widely circulated version that we reported on in May.
A few things stand out in the revised bill, co-authored by Senators Cynthia Lummis (R., Wyo.) and Kirsten Gillibrand (D., N.Y.).
For one, it would split oversight of the industry, granting the Commodity Futures Trading Commission primary authority over the crypto spot markets, while leaving the Securities and Exchange Commission with oversight of a broad swath of tokens.
The latest draft also scales back a provision that would have allowed for a new crypto self-regulatory organization.
The bill would also broaden the definition of tokens that would be policed by the SEC as compared to the old draft. Provisions would give the SEC authority to regulate some types of digital tokens, including those that derive profit from others’ managerial efforts or that provide a financial interest in the token’s issuing entity.
The latest version also allows courts to make exceptions to the presumption that a token counts as a commodity. The earlier version had given that power to both the courts and the SEC.
Lummis and Gillibrand have said they plan to release the final bill next Tuesday.
“The bill clarifies the universe of digital tokens that would fall under the SEC’s jurisdiction,” said a spokesperson for Lummis. The latest draft “restricts the SEC’s authority instead of expanding it,” the spokesperson added.
“There have been multiple drafts circulating recently,” said a spokesperson for Gillibrand. “This is not the final draft and further changes are still being made.”
The earlier version of the bill had attracted sharp criticism from part of the industry. Some lobbyists viewed it as creating an unwieldy regulatory regime, carving up oversight among the SEC, CFTC, and a new self-regulatory organization. They also said that version gave the SEC too much leeway in determining that a token qualified as a security.
The more recent version includes significant changes, some of which seem to be in response to industry feedback. It is unfinished and will likely change further before the bill is released, according to people familiar with the matter.
Rather than authorizing a new regulatory body, for instance, the 67-page draft would ask the SEC, CFTC and industry groups to analyze the creation of such an organization. While some crypto organizations and companies had supported the creation of a self-regulatory body, the Blockchain Association, an industry trade group, had opposed it.
Other provisions of the new draft include:
- Excluding up to $100 in income from capital gains tax if a cryptocurrency is used to buy goods or services. The earlier draft had previously set the limit at $600.
- Creating a process for companies to register as a “digital asset exchange”
- Establishing an “advisory committee on financial innovation” that includes members from the SEC, CFTC, Federal Reserve Board, the fintech industry, consumer protection groups, and others. The committee would study various aspects of the crypto industry and make regulatory and legislative recommendations to the White House and Congress.
- Requiring studies on energy use in digital asset markets and on DeFi protocols, and new standards on the use of China’s central-bank digital currency on government devices
With less than six months until the midterm elections in November, it is unlikely that the Lummis-Gillibrand bill, or any comprehensive legislation on crypto, will pass Congress this year.
Still, the industry has closely watched this bill’s development. If nothing else, it sets the stage for debate and potentially passing something in next year’s Congress.
Lummis and Gillibrand recently noted that their bill would have to clear four Senate committees, but Gillibrand said she expected votes in the Senate next year “at the latest.”
Write to Joe Light at firstname.lastname@example.org
Credit: Source link