The News: At long last, Senators Cynthia Lummis (R-WY), a member of the Senate Banking Committee, and Kirsten Gillibrand (D-NY), a member of the Senate Agriculture Committee, introduced a bipartisan bitcoin bill. Titled the Responsible Financial Innovation Act, this is the first major bipartisan effort to create a comprehensive digital asset regulatory framework. Read the announcement here.
At Long Last: A Bipartisan Bitcoin Bill
Analyst Take: At long last, a bipartisan bitcoin bill. Comprehensive in its considerations, the bill is nonetheless unlikely to pass. But that’s not the point.
The 69-page bill covers everything from the regulatory jurisdiction of the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) to the applicability of the Howie Test for securities, to a tax exemption for up to $200 of capital gains when a cryptocurrency is used to buy a good or service. Little has escaped the scope of the proposed legislation.
The senators have deliberately included provisions to allay the concerns of their many peers who are less enthusiastic about cryptocurrencies. For those concerned about what happens when cryptocurrency firms go bankrupt, it considers consumer bankruptcy protections. For those concerned about environmental impact, it requires a study on the energy use in mining. For those concerned about stablecoin stability, it mandates disclosures and 100% backing in “high-quality liquid assets.”
In short, the Lummis-Gillibrand bill covers a lot of ground. But it wasn’t written to pass, it was written to start the conversation.
The Lummis-Gillibrand Bill Is A Framework For What Will Ultimately Pass
The U.S. is behind Europe on cryptocurrency regulations. The EU issued comprehensive and detailed rules that establish clarity for consumers and businesses alike. The U.S. has not. We find ourselves today in a situation not unlike that of GDPR a few years ago where Europe had forged ahead with privacy protections that the U.S. had barely begun to debate.
The senators’ bill looks to bring the U.S. up to par. That’s not to say that our regulations will be the same, but rather that they will provide the same clarity – and trust – to participants in the industry.
As Circle’s Dante Disparte stated on Washington Post Live: “in its ambition this bill also starts to create a framework that can start to rival what we’re seeing from other major countries and economies around the world.”
As I said earlier, this bill was never intended to pass – it was intended to start the conversation, and that’s a good thing. The final bill needs to settle a dispute between the CFTC and the SEC, establish registration requirements for digital asset exchanges, determine the legal status of Decentralized Autonomous Organizations (DAOs), and more.
Those are big, hairy questions that will impact many well beyond the cryptocurrency industry, and it will absolutely involve many more congresspeople than just the two sponsoring senators.
But this is where it begins. Bipartisan, considered, legislation that at long last is a real starting place for the legislation that ultimately needs to be passed.
Disclosure: Futurum Research is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of Futurum Research as a whole.
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Jared is an Analyst in Residence at Futurum Research, where he helps guide our practice in all things Web3, the Metaverse, and cryptocurrencies so as to help business leaders understand how they work, why they matter, and how they can not only get involved, but become market leaders along the way.
Jared previously co-founded and served as President and Board Member of Triple Point Liquidity, a blockchain-based fintech startup serving alternative asset managers, their investors, and fund administrators. Prior to Triple Point, he held multiple roles at IBM including leading Digital Assets at IBM Blockchain, leading corporate development for Industry Platforms, and founding Watson Risk & Compliance.
Jared is author and podcast co-host at Fat Tailed Thoughts and serves as a trustee for The Williams School.
Jared holds an AB from Dartmouth College.