Proposed ‘Crypto Bill’ set to reform digital assets in the US
The Digital Asset Market Structure and Investor Protection Act (Crypto Bill) proposes sweeping reforms to digital assets in the US. It represents a big jump from an already progressive approach to digital asset regulation. A vital feature of the new Bill is a strong position on Stablecoins, which are digital assets secured to a fiat currency such as the US Dollar or AUD. The Bill would grant the US Treasury Department oversight over the development of stablecoins and veto power over coins that do not fall within their requirements, which could see many stablecoins effectively banned.
The Bill will also allow the Federal Reserve to create a US central bank digital currency (CBDC). A CBDC has been under consideration for some time in the US. However, the legislation authorizing the creation of a US CBDC and veto power over any other US CBDCs could suggest that the United States is seeking to entrench its place as the only issuer of a US CBDC.
Companies seeking to issue a stablecoin in the United States or those that already operate an existing stablecoin will now have to apply to the Treasury Department for approval of the use of stablecoins. The Treasury will have to consult with the Securities and Exchange Commission (SEC), the Federal Reserve, the Commodity Future Trading Commission (CFTC), and foreign entities before approving the proposal. This should be a key consideration for companies developing US-denominated stablecoins.
The Bill also aims to move towards regulatory clarity by defining digital asset terminology and demarcating specific digital asset attributes under the purview of either the SEC or the CFTC. The bill, if passed, will create a “digital asset securities” definition to fall under the SEC’s control. Tokens that entitle holders to equity, dividend payments, profits, interest or voting rights, and tokens issued via an Initial Coin Offering will come under this definition and, thereby, under the SEC’s jurisdiction. The bill would require cryptocurrencies outside of the SEC’s jurisdiction to fall under the CFTC jurisdiction.
Finally, the Bill seeks to address the privacy concerns surrounding Decentralised Finance (DeFi) by compelling several US agencies to submit recommendations to Congress regarding anonymity. The Financial Crimes Enforcement Network (FinCEN) shall issue rules that govern money rules, anonymizing services, and anonymity-enhanced convertible currency transactions. The bill does not explicitly regulate DeFi but imposes obligations on the SEC, CTFC, Federal Reserve, and the Treasury to consider potential regulatory guidelines and provide recommendations.
Any digital asset operators in the US should consider this Bill. The sweeping changes, and some retrospective changes, could change existing practices and the regulation of projects already in place.