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The regulatory framework for cryptocurrencies in the US is about to change following the bill introduced by Senator Cynthia Lummis and Senator Kirsten Gillibrand. The bipartisan bill introduced by the two legislators surrounds crypto regulations.
The Responsible Financial Innovation Act represents some of the most comprehensive legislation surrounding the crypto space that have been addressed so far. If this bill is passed, it will trigger consequences across the industry.
Senators launch new crypto bill
The bill was announced several months back, and it has now seen the light of day. The bill seeks to completely transform the digital asset sector and its relationship with regulatory institutions in the US.
This bill will mark the first time that the US Senate is focusing on a single bill about the regulatory framework for cryptocurrencies. The bill will provide the regulatory clarity that is needed for crypto assets.
Senator Lummis commented on the bill, saying, “The Responsible Financial Innovation Act creates regulatory clarity for agencies charged with supervising digital asset markets, provides a strong tailored regulatory framework for stablecoins, and integrates digital assets into our existing tax and banking laws.”
The 67-page bill includes a provision that differentiates crypto securities and commodities. It also outlines the specific agencies tasked with regulating the crypto market. According to this bill, some of the largest cryptocurrencies like Bitcoin and Ethereum will be treated as commodities, and the Commodity Futures Trading Commission (CFTC) would have oversight over these assets.
The CFTC will have authority over the crypto spot markets, an area that has been under the turf of the US Securities and Exchange Commission (SEC). The bill would be a major win for the cryptocurrency industry, as it has favored the CFTC over the SEC. The SEC has been aggressive towards regulating the crypto space. The SEC has also been accused of failing to give clear regulatory guidelines on the market.
The other provision of the bill is that it also seeks to support the use of cryptocurrencies to pay for goods and services. Crypto payments surpassing $100 will not be subject to a capital gains tax. The tax exemption will be exclusive to crypto transactions used to pay for goods and services. It will exempt transactions that change “digital assets to cash, digital assets to digital assets or digital assets to other financial assets.”
Other provisions of the bill
The other critical provision of this bill is that it will focus on decentralized autonomous organizations (DAOs). The bill defines DAOs as a “business entity which is not a disregarded entity.”
The bill also defines a DAO as “an organization which is properly incorporated or organized under the laws of a State or foreign jurisdiction as a decentralized autonomous organization, cooperative, foundation or any similar entity.”
The bill does not require that DAOs be incorporated under the legislation of a recognized jurisdiction, but it only gives them the option of incorporating the company to receive tax benefits. DAOs are not prevented from continuing their operations as unincorporated.
The bill also talks about the definition of a cryptocurrency broker. The definition seeks to exempt wallet providers, miners, software developers, and validators from tax reporting requirements. The bill also addresses stablecoins, allowing banking institutions to issue these tokens.
The bill will likely not pass the Senate vote without calls for amendments. It could ignite debate about the much-needed regulatory clarity in the cryptocurrency space. Some of the parties that could address the issues of what needs to be changed or added include legislators, industry experts, and lobbying groups.