Lummis and Gillibrand want to strengthen CFTC and treat digital assets like commodities – Reuters News in France and abroad

United States Capitol building in Washington, DC

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As excited as Wall Street and Main Street were to have crypto as a new investment idea and store of value, the speed at which cryptocurrencies entered mainstream U.S. markets caused commensurate angst for U.S. regulators, who n were only equipped with decades-old securities laws. an industry that many still refer to as the financial Wild West.

But after months of research, industry consultation and bipartisan teamwork, the senses. Kirsten Gillibrand and Cynthia Lummis said on Tuesday they were ready to launch the first major attempt to put guardrails around the fledgling industry.

Their bill, titled Responsible Financial Innovation Act, amounts to a regulatory overhaul that would classify the vast majority of digital assets as commodities like wheat, oil or steel. As such, the bipartisan legislation would also leave the bulk of oversight responsibility to the Commodity Futures Trading Commission and not the Securities and Exchange Commission as some had expected.

Gillibrand, a New York Democrat who serves on the Senate agriculture committee, and Lummis, a first-time Republican from Wyoming on the banking committee, said the legislation is the culmination of months of collaboration in the House and the Senate and represents a first criticism. attempt to structure digital asset markets with long overdue legal definitions.

Their offices presented the bill as “historic bipartisan legislation that will create a comprehensive regulatory framework for digital assets that encourages responsible financial innovation, flexibility, transparency and strong consumer protection while integrating digital assets into existing legislation”.

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The cornerstone of the legislation is how it defines the vast number of digital assets available to US investors and consumers.

With few exceptions, the bill designates digital currencies as “ancillary assets” or intangible, fungible assets that are offered or sold concurrently with the purchase and sale of a security.

Gillibrand and Lummis staff explained that their law treats all digital assets as “incidental” unless they behave like a security that a company would issue to attract investors to build a pool of capital.

Cryptocurrencies and other digital coins will not be treated as traditional securities under the supervision of the SEC, unless they entitle their holder to the privileges enjoyed by corporate investors such as dividends, liquidation rights or a financial interest in the transmitter, the offices told reporters.

They added that the bill is the product of months of discussions with other senators, including Republican Minority Leader Mitch McConnell and Pat Toomey, as well as Democrats like Ron Wyden.

Rep. Ro Khanna, a Democrat who represents Silicon Valley, also weighed in.

“My home state of Wyoming has gone to great lengths to lead the country in digital asset regulation, and I want to bring that success to the federal level,” Lummis said in a press release. “As this industry continues to grow, it is critical that Congress carefully craft legislation that promotes innovation while protecting the consumer from bad actors. »

“The Lummis-Gillibrand Framework will provide clarity for both industry and regulators, while maintaining the flexibility needed to accommodate the continued evolution of the digital asset market,” Gillibrand added in the same release.

The CFTC and the SEC together regulate large swaths of the US market and act as two powerful watchdogs of Wall Street. The former oversees the buying and selling of commodities like corn, coffee, gold and oil, while the latter oversees companies, executives and securities that seek to raise capital from the public.

While it is up to Congress to decide how government agencies police US markets, the SEC and its chairman, Gary Gensler, have led the public crusade for tougher crypto rules for more than a year.

“Currently, we just don’t have enough investor protections in funding, issuing, trading, or lending crypto,” Gensler told lawmakers in September. “Frankly, right now it’s more like the Old West or the old ‘buyer beware’ world that existed before the securities laws were enacted. »

Representatives for Lummis and Gillibrand said they worked with the SEC on their plan and spent weeks trying to address concerns expressed by regulator lawyers that the legislation would cede too much power.

They also said fees collected from issuers of digital assets would play a significant role in boosting the CFTC’s budget to deal with what is expected to be a deluge of regulatory oversight.

While Gillibrand and Lummis have experience working with the CFTC and SEC, respectively, it was unclear Tuesday morning what each institution thinks of the new legislation. Neither the CFTC nor the SEC immediately responded to CNBC’s requests for comment.

The contribution of both agencies is essential to the legal debate in the United States on how to define cryptocurrencies and other digital assets.

The Gillibrand and Lummis bill, for example, defines a “digital asset” as a native electronic asset that confers economic or proprietary access rights or powers and includes virtual currency and payment stablecoins.

He later defines virtual currency as a digital asset that is used “primarily” as a medium of exchange, unit of account, or store of value and is not backed by an underlying financial asset.

These definitions, while often laden with legalese, have a profound impact on how digital currencies are regulated and are therefore of great interest to the most powerful players in the growing world of crypto lobbying.

The industry has hired more than 200 officials and employees from the White House, Congress, Federal Reserve and political campaigns, according to the Tech Transparency Project. Meanwhile, crypto executives have contributed more than $30 million to candidates and federal campaigns since the start of the 2020 election cycle, according to documents on file with the Federal Election Commission.

Both Lummis and Gillibrand want to work with their peers to develop their respective states into blockchain and crypto havens.

In the Empire State, New York Mayor Eric Adams invested his first paychecks in bitcoin and ether, while Rep. Ritchie Torres, a Democrat representing the Bronx, said in March that his city “should and must embrace crypto if it is to remain the financial capital of the world. »

Wyoming, meanwhile, changed its laws in 2019 to create a new type of bank charter called a special-purpose depository institution to accommodate crypto startups and trading platforms and remains on an aggressive path to diversify into finance and move away from old school industries like coal and gas.

The two senators’ staff touted key features of the bill during a call with reporters, including certain tax exemptions that would prevent stablecoin holders from having to report income changes each time they make a purchase with digital currency.

This information would inform investors of the issuers’ experience with developing digital assets, the price history of the issuers’ prior assets, expected costs, and descriptions of each issuer’s management teams and liabilities.

Even though staffers described the bill as a mix of contributions from politicians on both sides of the political aisle, they acknowledged that its size and complexity could force lawmakers to divide it and attempt to pass. its components piece by piece.

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Lummis and Gillibrand want to strengthen CFTC and treat digital assets like commodities – Reuters News in France and abroad


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