Bipartisan crypto bill lays out rules to treat most digital assets as commodities
https://www.cnbc.com/2022/06/07/bipartisan-crypto-bill-lummis-and-gillibrand-want-to-empower-cftc-treat-digitals-assets-like-commodities.html
"The first major bipartisan legislation aimed at taming the “Wild West” crypto market would classify digital assets as commodities like wheat or oil and empower the Commodity Futures Trading Commission to rein in the nascent industry."
This headline is wrong (or at least very misleading)
"Most" crypto assets will likely be declared as securities.
Bitcoin was already declared a commodity back in 2017. That's why large institutional investors are more comfortable investing in Bitcoin but stay away from the rest of crypto.
The way they decide if something is a security is called the Howie Test which looks like this:
The key issue is how the tokens are distributed. Most crypto (especially those using Proof of Stake) have a large portion of the tokens given to the founders at launch. To the regulators this looks a lot like a security.
Proof of Work on the other hand is "mined" like a commodity. Everyone on the network has a fair chance of getting tokens for participating in the mining process. Bitcoin is not the only PoW chain, but it's by far the largest and there's only a handful of others.
It might seem like a subtle difference, but it's important to realise that owning Bitcoin is more like owning a piece of gold. You can own some and someone else can own some but no one person can change the rules. Gold must be found, just like Bitcoin must be found.
The rest are very likely not going to be declared commodities.
This is a new bill. Not a law and it would address this distinction. They are, in general, view as securities and this bill would change that. Read the story.
The bill's authors:
"Cryptocurrencies and other digital coins won’t be treated like traditional securities under the Securities and Exchange Commission’s scrutiny unless the holder is entitled to the privileges enjoyed by corporate investors like dividends, liquidation rights or a financial interest in the issuer."
For anyone interested here's a link to the actual bill:
https://www.gillibrand.senate.gov/imo/media/doc/Lummis-Gillibrand Responsible Financial Innovation Act [Final].pdf
And I think this is the relevant section people are talking about:
I'm no lawyer, but at this stage it's certainly not clear to me how many crypto assets would fall into the "exclusion".
I suspect that whatever interpretations you read in the media should be taken with gain of salt. And like you said, this new bill is just a proposal at this stage. It's unlikely to get passed as law without some changes.
Totally agree. Crazy times!
Fair enough. There seems to be conflicting interpretations out there.
I guess everyone is still trying to unpack the 69 page bill.
It will be interesting to see how it unfolds.
It's about time. Save for a few companies, I just don't trust enough of the crypto ecosystem to hop in head first.
Regulations will help protect investors, prevent fraud, and provide clear guidance to allow companies to innovate. Hopefully, these regulations will also address environmental concerns related to crypto mining as I know that it uses a tremendous amount of energy.
I think regulations will only help crypto grow. That said, I realize a lot of its appeal to people is that it eliminates a centralized arbitrator. I'm excited about its potential but it needs to get cleaned up a bit more.
Good idea. The crypto space could benefit from a bit more legitimacy.
Crypto has been largely unregulated in the U.S. This bill would create a framework for digital assets that encourages transparency and consumer protections while "integrating digital assets into existing law.”
One big deal if this is made law is that it will codify a definition of digital currencies in federal law. To this point, I believe different agencies have been using their own definitions.
Digital currencies are “'ancillary assets,' or intangible, fungible assets that are offered or sold in tandem with a purchase and sale of a security."
Blockchain leaders seem excited about the possibility of the new law to help treasure investors that have been rattled by crypto's sharp decline.
“The bill matters as it is a step in the right direction for legislation and definition of ‘crypto,’ what a ‘crypto asset’ is and what regulation will look like,” Nick Donarski, the founder and CTO of ORE System, told TechCrunch.