Senators to Propose Industry-Friendly Cryptocurrency Bill

WASHINGTON—A pair of US senators began proposing legislation that would create specific exemptions to federal laws for certain cryptocurrencies amid intense lobbying pressure from the industry to evade existing regulations.

You s. Cynthia Lummis (R., Wyo.) and Kirsten Gillibrand (D., NY) are set to submit a bill Tuesday called the Responsible Financial Innovation Act, which aims to create a “complete regulatory framework for digital assets.” In a joint press release, they said the crypto market will balance the need for scarcity and consumer protection with a desire to foster financial innovation.

“As this industry continues to grow, it is critical that Congress carefully draft laws that protect the consumer against bad actors while encouraging innovation,” said Ms. Lummis.

WSJ’s Dion Rabouin explains why Wall Street is betting big on crypto and what this means for the new asset class and its future. Photo composition: Elizabeth Smelov

Ms. Lummis has been the Senate’s most outspoken advocate of cryptocurrency since she took office last year. In her 2022 financial statements, she reported that she personally owns between $100,000 and $250,000 in bitcoin.

Aides to Congress said the bill had little chance of progressing this year through the Democrat-controlled Senate. Similar legislation introduced by crypto-friendly lawmakers in the House has been rotten.

The bill aims to separate some cryptocurrencies from the jurisdiction of the Securities and Exchange Commission, among other goals. It will also create new concepts in nearly 90 years of securities laws that will allow issuers of some digital tokens to meet lighter disclosure requirements than those faced by public companies.

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SEC Chairman Gary Gensler said most cryptocurrencies meet the definition of securities and must register with the agency.

“This legislation would be quite enough to undermine existing securities laws by creating an alternative route that could bypass existing, time-tested rules,” said Mark Hays, a senior policy analyst on fintech at Americans for Financial Reform, a progressive advocacy group. . He added that the bill would create a new class of securities that lack the necessary investor protections.

Cryptocurrency lobbyists have long complained that regulation by the SEC is expensive and cumbersome, and that the agency provides insufficient guidance that assets meet the legal definition of a security. Issuers of digital tokens and trading platforms that allow investors to buy and sell them have refused to register with the SEC and are largely unregulated as a result.

Under the Lummis-Gillibrand bill, sufficiently “decentralized” digital tokens – a legally obscure name most often associated with the largest cryptocurrency, bitcoin – would be treated as commodities like gold or wheat. The Commodity Futures Trading Commission will be empowered to regulate the so-called spot markets for such assets. Currently, the agency only has jurisdiction over the commodity derivatives markets.

“We’re really excited about this bill and we think it’s come to a really, very great place,” said Michelle Bond, CEO of the Association of Digital Asset Markets, a crypto industry trade group whose members include the trading platform. FTX. He said that even if the bill does not progress in its current form, it will lay the groundwork for future crypto-related legislative proposals.

In addition, the bill will impose limitations on a provision in last year’s bilateral infrastructure law that requires cryptocurrency brokers to provide certain information to the Internal Revenue Service. It will also protect investors from capital gains taxes when they use cryptocurrencies to purchase goods and services for up to $200 per transaction.

It will also allow crypto miners to avoid paying income taxes until they can cash out new assets, which is an advantageous tax rule compared to other property types.

“There’s a huge loophole in the tax code,” said Todd Phillips, director of financial regulation and corporate governance at the Center for American Progress.

In a separate initiative, leaders of the Senate Agriculture Committee, which oversees the CFTC, people familiar with the matter, are working on a bipartisan regulatory framework that would provide the agency with oversight of non-securities cryptocurrencies.

summer Paul Kiernan at [email protected]

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