Senators Cynthia Lummis and Kirsten Gillibrand have introduced a new bipartisan bill. The measure is the most comprehensive crypto legislation, establishing a wide range of requirements that, if enacted, will touch all facets of the crypto sector.
After months, the long-awaited groundbreaking crypto law was finally released. On Tuesday, U.S. Senators Cynthia Lummis and Kirsten Gillibrand unveiled the Responsible Financial Innovation Act. This new crypto law intends to overhaul the digital assets market and its interaction with U.S. regulatory bodies. The measure attempts to achieve Senate approval for a regulatory framework with much-needed legal clarity for crypto-related issues. Senator Lummis said:
“The Responsible Financial Innovation Act creates regulatory clarity for agencies charged with supervising digital asset markets, provides a strong, tailored regulatory framework for stablecoins, and integrates digital assets into our existing tax and banking laws.”
The 67-page bipartisan bill contains provisions to resolve the most pressing issues currently plaguing the crypto industry, such as crypto securities-commodities distinction and the regulatory authority of the enforcement agencies. Specifically, the Lummis-Gillibrand bill will classify most cryptocurrencies, including Bitcoin and Ethereum, as commodities and allow the CFTC primary jurisdiction over crypto spot markets. This implies that the SEC, which has long sought to extend its regulatory reach into the cryptocurrency business, can only play a supporting role with limited monitoring authority.
If enacted, this bill provision will be widely regarded as a victory for the industry, which has openly favoured the CFTC over the SEC due to the latter’s strict stance towards industry stakeholders and its failure to provide regulatory clarity regarding the legal nature of digital assets.
The law also intends to exclude from capital gains tax on goods and services worth less than $100. The tax-exempt provisions apply to “personal transactions for goods and services” and exclude transactions that convert digital assets to cash, digital assets to digital assets, or other financial assets. Interestingly, in an earlier bill draft, the limit was previously set at $600.
According to the bill, decentralised autonomous organisations (DAOs) are business entities properly incorporated or organised under state or foreign jurisdiction laws. Notably, the clause does not oblige DAOs to be under the laws of a recognised country but instead allows them to incorporate to get tax advantages. The condition does not prevent unincorporated DAOs from existing.
The law clarifies the definition of a cryptocurrency broker to protect wallet providers, software developers, miners, and validators from onerous tax reporting obligations. Notably, the Responsible Financial Innovation Act establishes a transparent set of standards for stablecoins, permits depository institutions such as banks to issue them and mandates that all stable crypto assets be backed by 100% of the respective assets.
Even though the bill has little chance of passing in its present form in the Senate, it will undoubtedly spark a much-needed debate among politicians, industry experts, stakeholders, and lobbying organisations on opposing sides of the issue.
