Very recently, a bill has been introduced by Rep. Paul Gosar (R-Ariz) to reform U.S. cryptocurrency regulation. The Crypto-currency Act of 2020 sets out to define categories of digital assets and explain which federal agency will overlook tranche. The bill is expected to bring legacy to crypto assets in the United States. The law will remove regulatory uncertainty and is thought to attract conventional investors. A number of projects are choosing to elsewhere just because of regulatory uncertainty. The bill announced recently is the latest to take a holistic approach to crypto regulation.
The bill categorized digital assets into three sections including crypto-commodity, crypto-currency and crypto-security with the Commodity Futures Trading Commission (CFTC). Another report came that the bill is faulty and displays a lack of basic understanding of the pertinent federal laws and regulatory agencies. The efficacy and overreach of the bill has been in discussion since mid-December. After reviewing the latest version of the bill it has been confirmed that the bill is dead on arrival. The sweeping ambition of the bill is already redefining the scope of crypto regulation.
The bill introduced by Gosar defines crypto-commodities as an economic good or service including derivatives that have full of substantial fungibility. The bill would place bitcoin, ethereum, and any digital assets under the purview of the CFTC, which doesn’t regulate commodities themselves. The CFTC does not mean they regulate the day-to-day activity of spot exchanges. FinCEN was selected to oversee ‘’crypto-currencies’’ even not being a regulator of currency.
Definition and Proposal
The definition reportedly given to ‘’crypto-securities’’ by the bill does not capture real-world use cases of blockchain technology. According to the bill’s rule, a tokenized mortgage, which is already regulated by state and federal banking laws, would be a crypto-security demanding registration with the SEC absent an offering exemption. Another opinion came that broad definitions may not allow projects room to breathe. Hester Pierce’s proposal is taken as a safe harbor for token projects which grants three years exemption for projects to decentralize.
Lawson Baker said that the definition infers all cryptocurrencies will operate on blockchains and public ledgers fully disregarding how privacy coins like Zcash will run in the future. Mati Greenspan thinks effect of corona virus are distracting people’s investing mode. On the other hand, Nic Carter said crypto is an asset class that’s really just an outlet for gambling. The bill is failure to address a clear guidance for tax liabilities.
A Token Taxonomy Act was successfully introduced but suddenly got stalled at the time of reviewing on the other hand Erik Finman is confident that his bill will pass. A robust set of rules should be brought to regulate the industry. The courts are expected to be there to provide guidance. Most of the statutory schemes and the Swiss system don’t work so it’s hard to get a comprehensive plan. Regulators should continue providing guidance and stay fast.