US Congress achieves first major success with two crypto bills: Law Decoded

US Congress achieves first major success with two crypto bills: Law Decoded

The Advancing Regulatory Clarity in the US Crypto Industry

Last week, the United States took a significant step towards regulatory clarity for its crypto industry. In a 35–15 vote, the House Financial Services Committee (FSC) approved the Financial Innovation and Technology for the 21st Century Act. This milestone bill aims to establish clear rules for crypto firms on when to register with either the Commodity Futures Trading Commission (CFTC) or the Securities and Exchange Commission (SEC).

Simultaneously, another significant piece of legislation, the bipartisan Blockchain Regulatory Certainty Act, sponsored by Republican Representative Tom Emmer and Democratic Representative Darren Soto, also passed a vote in the FSC. This act focuses on removing hurdles and requirements for “blockchain developers and service providers” such as miners, multisignature service providers, and decentralized finance platforms. These legislative developments demonstrate a growing recognition of the importance of blockchain technology and the need for appropriate regulations to foster its growth.

However, amidst this progress, several lawmakers refused to support another proposed piece of legislation known as The Digital Assets Market Structure Bill. Representative Maxine Waters criticized the bill for being too aligned with the demands of the crypto industry and disregarding regulatory guidance from the SEC. This divergence of opinions highlights the ongoing challenges in finding the right balance between innovation and regulation in the crypto industry.

The U.S. Senate also made significant strides in regulating cryptocurrencies through the $886 billion 2024 National Defense Authorization Act. A group of senators, including Cynthia Lummis, Elizabeth Warren, Kirsten Gillibrand, and Roger Marshall, advanced a crypto-related amendment within the bill. This amendment will require the establishment of examination standards for crypto and compel the U.S. Treasury Department to conduct a study aimed at curbing anonymous crypto transactions. This includes transactions made through crypto mixers like Tornado Cash, which provide privacy by obscuring the source of funds.

New Capital Rules for Crypto Holdings in Canada

Canada’s financial watchdog, the Office of the Superintendent of Financial Institutions (OSFI), is proposing changes to its capital and liquidity approach to crypto assets. The proposed rules aim to simplify institutions’ approach to perceived crypto risks by defining four categories of crypto assets and their corresponding capital treatment. This move signals the Canadian government’s commitment to ensuring the stability and integrity of the country’s financial system amid the growing adoption of cryptocurrencies.

To facilitate public input, the OSFI has opened public consultations on two draft guidelines until September 20th. One of these guidelines pertains to federally regulated deposit-taking institutions like banks and credit unions, while the other addresses the regulatory capital treatment of crypto-asset exposure for insurers. By providing clearer guidelines and regulatory frameworks, Canada aims to foster innovation and growth in its crypto industry while safeguarding financial stability.

Russia is forging ahead with its central bank digital currency (CBDC), as President Vladimir Putin signed the digital ruble bill into law. This pivotal development signifies the country’s commitment to modernizing its financial system and adapting to the digital age. The digital ruble law is officially set to take effect on August 1, 2023, with nearly all rules ready for enforcement. However, Article three, which includes amendments to several Russian federal laws related to bankruptcy and inheritance, will come into effect from August 2024.

The newly enacted legislation empowers the Russian central bank to launch the first CBDC pilot with real consumers. Previously, the government anticipated conducting trials in April in collaboration with 13 local banks. This milestone in Russia’s CBDC journey highlights the country’s ambition to leverage the benefits of blockchain technology in transforming its financial landscape.

Binance Seeks Dismissal of CFTC Lawsuit

Cryptocurrency exchange Binance, along with its CEO Changpeng “CZ” Zhao, has requested the dismissal of a lawsuit filed by the U.S. Commodity Futures Trading Commission (CFTC). In a court filing, Binance and CZ’s attorneys argue that the CFTC has exceeded its regulatory authority and engaged in regulatory overreach. They contend that the CFTC’s attempt to regulate foreign individuals and corporations operating outside the U.S. goes beyond the limits of its statutory jurisdiction and interferes with established principles of comity with foreign sovereigns.

The CFTC initiated the lawsuit against Binance in March, alleging that the company offered unregistered derivatives products in the U.S., including cryptocurrency trading services, futures, and options products. The regulator also accused Binance of inadequate supervision, lacking reliable Know Your Customer (KYC) or Anti-Money Laundering (AML) programs, and failing to register as a futures commissions merchant, designated contract market, or swap execution facility. This legal battle highlights the complexities of regulating a global industry and the need for international cooperation in establishing coherent regulatory frameworks.

In conclusion, recent developments in the blockchain industry showcase the growing recognition of the importance of regulation to ensure the sector’s responsible growth. The United States, Canada, and Russia have made significant strides in establishing clearer regulatory frameworks for cryptocurrencies and blockchain technology. As the industry continues to evolve and innovate, it is crucial to strike a balance between fostering innovation and protecting consumers and financial stability. Through collaboration and thoughtful regulation, the blockchain industry can thrive and transform various sectors of the global economy.

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