Here’s What US Senators Put in New Crypto-Friendly Bill

Kirsten Gillibrand and Cynthia Lummis. Source: a video screenshot, Yahoo Finance / YouTube

In a bipartisan effort to pave the way for more crypto-friendly regulations in the US, Wyoming Republican Senator Cynthia Lummis and Democratic senator representing the state of New York, Kirsten Gillibrand, are set to introduce a new draft bill today, dubbed the ‘Responsible Financial Innovation Act’.

The bill, also known as ‘Lummis-Gillibrand’, makes “a clear distinction between digital assets that are commodities or securities,” providing “digital asset companies [with] the ability to determine what their regulatory obligations will be,” according to the legislative proposal’s summary.

Under the plan, the legislation is to delegate oversight of the most popular cryptoassets to the Commodity Futures Trading Commission (CFTC). This would leave the powerful Securities and Exchange Commission (SEC) on the sidelines of the crypto regulatory framework.

“Digital assets that meet the definition of a commodity, such as bitcoin and ether, which comprise more than half of digital asset market capitalization, will be regulated by the CFTC,” said the announcement.

Per the section-by-section overview, among other things, Lummis-Gillibrand Responsible Financial Innovation Act:

• creates definitions for ‘digital asset’, ‘virtual currency’, ‘payment stablecoin’, ‘smart contract’, and similar important terms in this space;
• provides a de minimis exclusion of up to USD 200 per transaction from a taxpayer’s gross income for use of virtual currency for payment for goods and services, under specified conditions;
• clarifies the definition of ‘broker’ for the purposes of the Infrastructure Investment and Jobs Act’s new reporting requirement on digital assets, delaying the implementation date to January 1, 2025;
• specifies that certain decentralized autonomous organizations (DAOs) are business entities for the purposes of the tax code;
• establishes that digital asset lending agreements are not generally taxable events;
• requires the Internal Revenue Service (IRS) to adopt guidance or clarifications on long-standing issues in the digital asset industry;
• declares that digital assets obtained from mining or staking activities do not form part of a taxpayer’s gross income until the disposition of those assets;
• makes a clear distinction between digital assets that are commodities or securities;
• grants the CFTC exclusive spot market jurisdiction over all fungible digital assets which are not securities;
• requires all issuers of payment stablecoins to: (1) maintain high-quality liquid assets valued at 100% of the face value of all outstanding payment stablecoins; (2) provide public disclosures on the assets backing the stablecoin and their value; and (3) have the ability to redeem all outstanding payment stablecoin at par in legal tender.

“As a former state treasurer, I am excited by the possibilities of incorporating digital assets into the American financial system. The legislation that [Kirsten Gillibrand] and I are proposing will do just that,” Lummis tweeted on Monday.

On May 27, Gillibrand tweeted that she was “working diligently” with Gillibrand to finalize the bill text of their “comprehensive digital asset legislation,” stating: “Any language circulating online is an incredibly outdated version from March 1. Stay tuned for our release of the actual bill on June 7th!”

Lummis is quoted in today’s announcement as stating that,

“The United States is the global financial leader, and to ensure the next generation of Americans enjoys greater opportunity, it is critical to integrate digital assets into existing law and to harness the efficiency and transparency of this asset class while addressing risk.”

On her part, Gillibrand stated that,

“Digital assets, blockchain technology and cryptocurrencies have experienced tremendous growth in the past few years and offer substantial potential benefits if harnessed correctly. It is critical that the United States play a leading role in developing policy to regulate new financial products, while also encouraging innovation and protecting consumers.”

The development comes as crypto executives and investors are reportedly gearing to launch a well-funded effort to elect a number of crypto supporters to Congress in America’s forthcoming midterm elections — in what could become the industry’s first major foray into national politics.