Yesterday, after months of anticipation, two U.S. senators, Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (D-NY), introduced the Responsible Financial Innovation Act, also known as the Lummis-Gillibrand bill for short.
Typically, we save these stories for our Regulatory Front section, but in this case, the news was too big to pass up as our leading piece. In short, the bill represents a watershed moment for our country’s crypto industry.
It is the first major BIPARTISAN regulatory framework for digital assets set forth that, if passes, will bring much-needed regulatory clarity for businesses, token issuers, and investors alike. Not only that, but the bill would essentially recognize digital assets as a legitimate part of the U.S. financial system.
Inside The 70-Page “Responsible Financial Innovation Act”
After sifting through the specifics, here’s pretty much everything you need to know about the bill, the key points, and what it means for the industry going forward…
- Most digital assets will be viewed as commodities, rather than securities. In this case, it means that several digital assets – including the big names like bitcoin and ethereum – would be overseen by the Commodity Futures Trading Commission (CFTC), instead of the SEC. This would be considered as a boon for the industry considering that the SEC has been extremely strict on crypto regulation, to the point that it’s been somewhat of a thorn in the side of domestic crypto innovation.
The move would also allow token issuers to know whether their potential token is either a security or a commodity before launching. As of today, many founders are hesitant to launch something simply because they don’t know which regulatory body or framework they must abide with. They deploy token protocols or business models, only to find out they didn’t file correctly, which typically leads to a harsh penalty or fine from the SEC. The new framework could be a solution that finally gives founders more clarity and confidence behind their decisions, without having to constantly worry about which side of the bed the regulators wake up on.
- You won’t get taxed on any crypto transactions under $200. The so called de-minimis exclusion would liberate the consumer purchases of goods and services via crypto from having any small-scale tax implications – paving the road for cryptocurrencies to serve more like, well, a real currency. Under current tax laws, we can’t buy anything – not even a cup of coffee – with bitcoin without getting hit by a capital gains tax derived from your initial bitcoin purchase.
Assets obtained by crypto mining won’t be taxed until the mined crypto is actually sold. Yes, in another “wait, this sh*t actually exists?” moment, mined bitcoin is currently getting taxed as income immediately after it gets mined. The bill aims to fix this headachy burden so that miners won’t be taxed until after they sell.
- All stablecoins must be 100% reserved. In light of the dramatic Terra/Luna collapse, it was easy to assume that stablecoin providers were going to be met with more scrutiny in the months ahead. It’s now evident that this framework doesn’t want to cut stablecoin providers any slack as well.
Interestingly, the bill outlines a new framework for banks and credit unions to also issue stablecoins to sort of level the playing field. The lawmakers insist that “existing stablecoin issuers and new entrants into the market have an adequate opportunity to compete with existing banks and credit unions.”
- Lastly, in what is perhaps the most important of all, this is a bipartisan effort. Lummis and Gillibrand sit on different sides of the political bandwagon, so it’s cool to see that crypto can be the driving force on bridging two political parties together – something we rarely ever see. This kind of stuff holds weight in the next phases of legislation.
What Happens Next?
Due to the nature of our political system, we probably won’t see anything signed or put into place until next year. The bill, as CoinDesk points out, will likely have to split into several pieces as it winds through congressional committees in the next session
But with Lummis on the Senate Banking Committee that oversees the SEC, and Gillibrand holding a spot on the Agriculture Committee that oversees commodities and the CFTC, the lawmakers are well positioned to propel this bill forward and into passing.