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All About the Crypto Bill from Senators Lummis and Gillibrand


A new crypto bill was proposed this week, and it has led to a wave of discussion across the industry.

There is a mixed bag of opinions revolving around this issue, involving very strong positions. However, a big part of the crypto space believes this to be a win for the industry.

Is it a win? We would find out ahead.

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All About The Crypto Bill

Before we get into how this bill protects the interests of everyone involved, we would take a brief look at everything proposed in this bill.

The crypto bill will essentially segregate digital assets into two classes, commodities and securities. The commodities will be under the regulation of the CFTC, while the SEC will be looking after the securities.

There will also be a third class, called “ancillary assets”. Because these assets don’t particularly fulfil the specs of either asset class, they have a separate identity. Solana is a popular example of this asset type.

Exemption from filing capital tax gains, on transactions of crypto assets under $200, is another crucial proposition under this bill. Getting over the inconvenience of making small-value transactions using crypto will be targeted under this policy.

The third major proposition under this bill is concerning stablecoins- coins that are pegged to a fiat currency. Under the bill, a stablecoin needs to be backed 100% by fiat reserves and high-quality assets. These assets also need to be easily liquidable.

As for staking of crypto, the bill mentions that any assets obtained through mining aren’t a part of taxpayers’ gross income until the conversion of those assets to fiat currency.

The bill also requires DAOs to be incorporated under the law as an identifiable jurisdiction, such as an LLC or a partnership.

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How Does this Bill Favor Everyone?

Arguably, one of the biggest wins for the industry, in the passing of the bill, is the shift in the authority of regulatory entities. Under this bill, the Commodities Futures Trading Commission will have a higher degree of control over these digital assets, and the control in the hands of the SEC will be compromised.

Though the SEC, which has refused to accept Bitcoin and Ethereum as securities, isn’t exactly out of the picture, the industry is happy now that its control is mitigated. Now, under the control of the CFTC, crypto developers and issuers will have a better time following guidelines to include their tokens under CFTCs influence.

To tackle the constant mockery of pseudo-innovation that the crypto industry is under, and to promote innovations that are legitimate, the bill will lead to the creation of a regulatory sandbox, that’ll act as a testing environment before the products are made available to the masses.

Commenting on the same, Gillibrand said, “federal and state regulators collaborate with financial technology companies to permit them to introduce innovative products into the market on a limited basis, allowing regulators to become more familiar with financial technology products in a controlled environment.”

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Positive Points in the Crypto Bill

From the point of investment, the crypto industry is still working on building trust. The complex nature of the industry is a different issue altogether.

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To nullify this inconvenience, an effort is being made to where comprehensive studies will be conducted- testing the compatibility of cryptocurrencies with 401k retirement plans. Although, the Department of Labor hasn’t exactly taken this proposition with an agreement.

As the bill grants CFTC a special spot market administration, one can expect a bitcoin spot exchange-traded fund (ETF) to be introduced in the US.

Another notable advantage of passing this bill is the elimination of reporting of capital gains from crypto. This is a good thing, because as of now, for every crypto purchase you make, you have to file for capital gains. By accounting for every transaction you’ve made and the price equivalent of crypto being transacted at that point.

If the new bill passes, making day-to-day transactions through crypto will be significantly convenient. Low-value transactions, with an upper limit of $200, will no longer require the filing of capital gains. This way, cryptocurrency can become a more integral part of our payment ecosystem. This will influence its adoption to a certain extent as well.

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The stable coin issue discussed under the bill is fairly noteworthy too.

As mentioned earlier, all the operational stablecoins will need to be entirely backed by reserves and high-quality liquid assets. This is an important issue, as the market has recently witnessed the Terra coin crash by more than 99%, wherein more than $40 Billion were evaporated from the market within a matter of days. This was a consequence of a poor coin-interaction mechanism, involving algorithmic stablecoins.

Addressing the importance of the same, Gillibrand said, “The 100 per cent reserve model guarantees that a stable coin holder can always redeem the stablecoin with the issuer in exchange for the equivalent dollar value, which maintains its stable value and protects consumers from many of the potential risks in the stablecoin markets today.”

Banks and credit unions will have an entirely new framework to issue stablecoins as well. Following this, investors’ money and investments will be better protected.

Conclusion

The crypto space is pretty decentralized, but also unregulated. And as per the senate, implementing some regulations in the industry will be in the best interest of everyone involved.

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The likelihood of this bill passing isn’t exactly solid, more so for this year. Hopefully, by 2023, this bill will go through. Until then, we can consider just the proposition of this bill as a big win for the crypto industry.

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