The recently introduced Lummis Gillibrand Responsible Financial Innovation Act, which contains significant implications for the future of cryptocurrency, is under debate in the Senate. This 274-page bill covers a wide array of cryptocurrency-related topics, from securities and commodities regulations, taxation, and broad interagency coordination to the regulation of “payment stablecoins”. However, its future is uncertain due to resistance from Banking Committee Chair Senator Brown and some fellow Democrats.
The Bill’s Journey and Resistance from the Senate
Despite the magnitude and potential implications of the bill, its chance of becoming law is compromised by political dynamics. Senator Sherrod Brown, the Banking Committee Chair, has expressed strong opposition to the bill, implying that it may never be granted a hearing. This political resistance is significant, as committee chairs can effectively terminate bills that they oppose by refusing to put them on the agenda.
The journey to becoming law is fraught with challenges. Every year, thousands of bills are introduced in Congress, but only a few hundred manage to pass one chamber, and even fewer become law. In order for a bill to progress, it needs to go through a committee. Bills introduced by Committee chairs stand the best chance, but the bill needs to at least not be strongly opposed by the Chair.
Despite its uncertain future, the Lummis Gillibrand bill has the potential to significantly impact the McHenry Thompson bill in the House. As the McHenry Thompson markup is due later this month, members can propose amendments to the bill at the markup. By releasing the Lummis Gillibrand bill now, parts of this bill that are crucial or beneficial could be incorporated into the McHenry Thompson bill, which has a higher chance of becoming law this year.
Significant Amendments and Policy Changes
Among the potential policy changes that could be adopted from the Lummis Gillibrand bill are several that are significant. For example, this bill includes a definition of a smart contract, a term that is not defined in the McHenry Thompson bill. This definition includes “taking possession or control of a crypto asset” and transferring the asset, which could have significant legal consequences.
The Lummis Gillibrand bill also mandates proof of reserves for crypto asset intermediaries and requires regular financial audits of these reserves. In addition, it contains stricter penalties for money laundering involving crypto assets, making such crimes punishable by up to five years in prison.
Another important change is in relation to the categorization of digital assets. The bill essentially bifurcates digital assets into either securities or commodities, with most assets likely falling into the latter category. This simpler system contrasts with the more complex framework in the McHenry Thompson bill, which categorizes assets based on a variety of metrics and triggers.
One last significant proposal in the Lummis Gillibrand bill is the creation of a self-regulatory organization (SRO) for crypto. Despite calls for such an organization, it’s difficult to establish from scratch. The Lummis Gillibrand bill simplifies this process but still requires approval from the SEC, CFTC, and FinCen, as well as presidential appointments to the board.
Conclusion
Whether or not the Lummis Gillibrand bill passes, it’s clear that it holds the potential to significantly impact the future of cryptocurrency regulation. The outcomes of these political processes, with their potential to rewrite rules and redefine practices, will undoubtedly shape the future of the cryptocurrency landscape in a profound and lasting manner.
