US Senators Cynthia Lummis and Kirsten Gillibrand presented the long-awaited cryptocurrency regulation bill that on June 7, 2022. The Responsible Financial Innovation Act is the most comprehensive crypto legislation to date in response to US President Biden’s Executive Order on Cryptocurrency released in March 2022. Here are the key points covered by the bipartisan bill.
1. Create a clear standard for determining which digital assets are commodities and which are securities, providing clarity and structure for businesses and regulators.
The bill defines if a digital asset is a commodity or a security using precedents under the Howey test. Distinctions between which are commodities and which are securities will determine what the regulatory obligations will be. Regulators then can enforce the commodities and securities trading laws.
2. Create clear definitions.
The bill defined terminology used in the digital asset space. This is to encourage discussions in digital asset regulation where each participant has full comprehension. The definitions will also enable all Americans to understand whether or not they are in crypto.
3. Assign regulatory authority over digital asset spot markets to the CFTC.
As most digital assets are more similar to commodities than securities, the bill gives the authority of regulation to the Commodity Futures Trading Commission (CFTC), instead of the Securities Exchange Commission (SEC).
4. Define and create strong requirements for stablecoins that will promote faster payments and will protect consumers.
Issuers of stablecoins will be required to hold liquid assets equal to the value of all stablecoins and to disclose these holdings to the public. This is to maintain their value and to protect consumers.
5. Create an advisory committee to develop guiding principles, empower regulatory agencies, and advise lawmakers on fast-developing technologies.
An advisory committee will study the continuing changes in the crypto industry and make recommendations based on the developments to keep regulation “relevant and effective.” The committee members will be a diverse group of individuals from the industry, advocacy groups, regulators, and experts in finance and consumers.
6. Impose disclosure requirements on digital asset service providers to ensure that consumers understand the product and can make informed decisions when engaging with digital assets.
Digital asset service providers should ensure that consumers understand their products, their rights, and the risks involved, including source code version changes and crypto lending.
7. Require a study on digital asset energy consumption.
The Federal Energy Regulatory Commission will analyze and report on energy consumption in the crypto industry.
8. Direct the CFTC and the SEC to study and report on the development of a self-regulatory organization (SRO).
A well-structured SRO is a complementary role that will work with regulators to help them stay nimble and efficient.
9. Direct the CFTC and SEC to consult with the Department of the Treasury and the National Institute of Standards and Technology to develop comprehensive, principles-based guidance relating to cybersecurity for digital asset intermediaries.
These agencies will work together to help the US lead in creating cybersecurity standards and rules for the crypto industry to prevent money laundering, terrorist financing, and sanctions avoidance.
10. Provide a regulatory sandbox for state and federal regulators to collaborate on innovative financial technologies.
Regulators will allow crypto firms to test new products on a limited scale and duration. This will familiarize regulators with the products and take part in consumer education and financial literacy.
11. Create a workable structure for the taxation of digital assets.
Purchases of goods and services less than $200 will be tax free. This section of the bill states rewards gained by miners and validators will not be considered as income until it has been exchanged for cash.
12. Direct the Government Accountability Office (GAO) to conduct an analysis of the potential opportunities and risks associated with investing retirement savings in digital assets and to report its findings to Congress, Treasury, and the Department of Labor.
This will give consumers the choice to invest their retirement savings in digital assets safely.
13. Direct the Office of Management and Budget, along with the Cybersecurity and Infrastructure Security Agency, the Director of National Intelligence, and the Department of Defense, to conduct an information security study around the digital yuan, China’s central bank digital currency.
These agencies will study the national security implications of the digital yuan and China’s intention to promote its international adoption.
The bill is not likely to become law during the current session of Congress, but analysts see it as a starting point for future discussions on the best way to oversee crypto.
Don’t forget that just like any investment in commodities or securities, you will do well to do your own research and analysis before deciding to buy or sell any crypto coin. Don’t invest what you cannot afford to lose. Make online safety a priority before making any transactions. Put majority of your digital assets in a wallet. Make sure you safekeep your Monero coins by putting them in XMRWallet, a secure and free web-based wallet that gives you full control of your XMR and keys. Always keep all your passwords, private keys, and seed phrases to yourself.