Latest Lummis-Gillibrand Bill Draft Unpacked

Latest Lummis-Gillibrand Bill Draft Unpacked

The Comprehensive Crypto Regulation Bill: A Second Draft Analysis

The blockchain and cryptocurrency industry is constantly evolving, and so is the regulatory landscape surrounding it. Recently, U.S. Senators Cynthia Lummis and Kirsten Gillibrand introduced a second draft of their comprehensive crypto regulation bill. While the chances of this bill becoming law are slim, it has the potential to spark a broader conversation within Congress about the need for crypto-specific legislation.

Round 2

This new version of the bill builds upon a first draft that was introduced a year ago. The fact that lawmakers are revisiting and refining the legislation demonstrates the ongoing efforts to understand the implications of cryptocurrencies and determine the appropriate regulatory framework.

Why it matters

Regulators are grappling with the challenge of defining the scope of their jurisdiction over crypto assets. Meanwhile, Congress is examining the broader question of whether new laws are necessary and, if so, what they should entail. The introduction of this bill highlights the importance of addressing regulatory concerns and finding a balance between innovation and investor protection.

Breaking it down

Senators Lummis and Gillibrand’s second draft addresses various aspects of the crypto industry. It includes a definition for decentralized finance (DeFi) and tackles issues such as anti-money laundering provisions and custody rules. Notably, the bill grants the Commodity Futures Trading Commission (CFTC) clearer authority over crypto issuers, while the role of the Securities and Exchange Commission (SEC) is more limited.

One of the key provisions of the bill is the definition of “crypto asset” and “crypto asset exchange” under commodities law, solidifying the CFTC’s authority over crypto spot markets. This addresses a request from the CFTC and incorporates feedback from the SEC, which sought to ensure that the bill does not undermine existing securities market regulations.

Another significant provision is the introduction of a de minimus tax exemption of up to $200 for payments made using cryptocurrencies. Currently, every transaction, regardless of its value, is subject to capital gains/loss tax. This provision aims to simplify tax reporting for smaller transactions and reduce the burden on both individual users and the Internal Revenue Service (IRS).

The bill also covers various other important aspects of the crypto industry, including definitions for stablecoins, algorithmic stablecoins, anti-money laundering rules, tax purposes for “brokers,” and settlement finality. By addressing these key issues, the bill provides a comprehensive framework for the regulation of cryptocurrencies.

The Road Ahead

While the fate of this bill remains uncertain, it is expected to stimulate discussion among lawmakers. Even if the bill itself does not pass, its provisions may serve as a reference point for future legislation or as inspiration for other lawmakers developing their own crypto-related bills. The House Financial Services Committee is currently the most likely to move forward with crypto-related legislation, with markups anticipated on stablecoin and market-structure bills.

Stories you may have missed

In addition to the developments surrounding the comprehensive crypto regulation bill, there are other noteworthy stories in the blockchain industry:

  1. Crypto Can’t Be Used as Money Due to ‘Inherent Flaws,’ BIS Tells G20: The Bank for International Settlements (BIS) has expressed skepticism about cryptocurrencies, stating that they have failed to harness innovation for the benefit of society and lack connection to real economic activity.

  2. Grayscale Argues Leveraged Bitcoin Futures ETF Approval Shows Spot ETF Should Be Approved: Grayscale, a subsidiary of CoinDesk parent company Digital Currency Group, has argued that the approval of a leveraged bitcoin exchange-traded fund (ETF) by the SEC highlights the need for approval of spot bitcoin ETFs. This argument suggests that the SEC’s decision-making process is arbitrary.

This week’s notable events

Here are some key events happening in the blockchain industry this week:

  • Commodity Futures Trading Commission’s Global Markets Advisory Committee meeting, including discussions on asset tokenization.
  • Federal court omnibus hearings overseeing the bankruptcy cases of Celsius and FTX.
  • Commodity Futures Trading Commission’s Technology Advisory Committee discussion on decentralized finance and related issues.

Elsewhere

In other news:

  • Lobbyists and crypto companies are rallying support for crypto legislation, aiming to shape the regulatory landscape.
  • Gizmodo, a media outlet, published a story generated by an artificial intelligence language model tool. The story’s publication sparked a debate about the role of AI in journalism.

If you have any thoughts or questions regarding the provisions of the comprehensive crypto regulation bill or any other feedback you’d like to share, feel free to email me at [email protected] or find me on Twitter @nikhileshde. Join the Telegram group conversation to engage with others in the industry.

Stay tuned for more updates in the next edition of the newsletter. See you next week!

Article edited by Pete Pachal.

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