Following a series of high-profile busts and failures, a bipartisan pair of senators has unveiled what would be the most comprehensive legislative proposal to regulate cryptocurrencies and other digital assets.
However, it is unclear whether the bill proposed by Senators Kirsten Gillibrand, D-N.Y., and Cynthia Lummis, R-Wyo., will be able to pass through Congress, especially given the heightened partisanship ahead of the midterm elections. The bill also comes at a time when proponents of cryptocurrency have grown into larger — and more free-spending — players in Washington.
The Responsible Financial Innovation Act, introduced on Tuesday, proposes legal definitions of digital assets and virtual currencies; requires the IRS to issue guidance on merchant acceptance of digital assets and charitable contributions; and distinguishes between digital assets that are commodities or securities, which has not previously been done.
Lummis said in an emailed statement that the bill “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.” Stablecoins are cryptocurrencies that are pegged to a specific value, usually the US dollar, another currency, or gold.
Lummis has been a vocal supporter of cryptocurrency development, and her financial disclosure shows that she has invested between $150,002 and $350,000 in bitcoin.
Among many other proposals, the legislation imposes disclosure requirements on digital asset firms to ensure that consumers can make informed decisions, delineates agency responsibilities over various digital assets — such as Commodity Futures Trading Commission jurisdiction over bitcoin — and requires a study on digital asset energy consumption.
The bill comes at a difficult time for cryptocurrencies, following the May meltdown of the terra stablecoin and luna, the coin meant to buy and sell assets, which traded at a value of less than one-tenth of a cent.
According to Gillibrand, the bill creates “a regulatory framework that fosters innovation, establishes clear standards, defines appropriate jurisdictional boundaries, and protects consumers.”
These developments have prompted lawmakers on both sides of the aisle to support legislation that will require a more thorough examination of digital assets.
Crypto lobbying has now followed suit. According to records and interviews, industry executives spent $20 million on congressional races this year for the first time.
Cryptocurrencies have congressional supporters. Sen. Cory Booker, D-NJ, stated last month at the DC Blockchain Summit in Washington that he is interested in “the exciting potential democratizing effect that can come from creating wider pathways of opportunity for marginalized communities.”
Despite the risks, surveys show that approximately 16% of adult Americans (40 million people) have invested in cryptocurrencies. In addition, 43 percent of men aged 18 to 29 have invested in cryptocurrency.
African Americans are also more likely than white consumers to invest in cryptocurrencies.
President Joe Biden signed an executive order in March urging the Federal Reserve to consider creating its own digital currency and directing federal agencies, including the Treasury Department, to investigate the impact of cryptocurrency on financial stability and national security.
In an April speech at American University, Treasury Secretary Janet Yellen stated that more government regulation is needed to police the proliferation of cryptocurrency and prevent fraudulent or illicit transactions.
“We have a strong interest in ensuring that innovation does not lead to fragmentation in international payment architectures,” she said, adding that the Treasury Department will collaborate with the White House and other agencies to develop digital currency reports and recommendations.