A United States congressman is the latest working to clarify determine which U.S. regulator is responsible for which digital assets.
On March 9, Representative Paul Gosar (R-AZ) introduced the “Crypto-Currency Act of 2020,” a bill that looks to choreograph a wide range of digital assets to answer to the appropriate regulator.
The proposed regulatory schema
As Will Stechschulte, Gosar’s legislative assistant, explained to we, “the bill looks to provide not only clarity, but legitimacy to crypto assets in the United States.”
Gosar’s proposal divides digital assets into three categories: crypto-commodity, crypto-currency and crypto-security. Respectively, the three categories would be governed by the Commodity Futures Trading Commission (CFTC), the Secretary of the Treasury via the Financial Crimes Enforcement Network (FinCEN), and the Securities and Exchange Commission (SEC).
Interestingly, the language of the bill would seem to cement the status of digital assets like Bitcoin as crypto-commodities rather than crypto-currencies. The classification of “crypto-currency” reads “representations of United States currency or synthetic derivatives” — more reminiscent of stablecoins like Tether (USDT).
The language behind crypto-securities, remains familiar: “all debt, equity, and derivative instruments that rest on a blockchain or decentralized cryptographic ledger.”
As to non-fungible tokens, the bill makes no mention.
Updates to the bill since December
The bill is an updated version of one that first leaked in December. The updated bill features expanded definitions for terms like “Decentralized cryptographic ledger” and “Smart contract” — concepts that U.S. legislators are struggling to cope with.
Possibly more significantly, the updated bill is more explicit about determining “primary” rather than “sole” regulatory responsibility. The exact implications remain to be seen, but the change could weaken the legal standing of crypto businesses arguing that, say, the SEC has no right to regulate them.
Industry stakeholder involvement in drafting
Breaking with typical congressional practice, Gosar is presenting the bill solo, without a co-sponsor. Stechschulte told we that “For introduction, it’s just going to be Congressman Gosar. […] After introduction, we’re hoping to garner some serious support.”
Communications Director for Gosar Ben Goldey explained the emphasis on industry engagement before legislative approval
“Since this is such a niche issue, we worked with stakeholders and outside groups/experts to get a good sense of the kind of clarity that the industry needed. We chose to gather stakeholder support before working toward cosponsors.”
One of the industry players involved in drafting the bill was pioneer Bitcoin investor Erik Finman.
Speaking with we, Finman said he had initially approached Gosar’s team to work on such a bill because “I like that they’re brave and will stand strong for anything.”
Regarding the bill’s history and development from the version that came out in December, Finman said that a number of participants had weighed in:
“That bill that leaked, we were experimenting with a couple of things, that was our second draft. We’re thirty-two versions away from that.”
The past year has seen a number of new draft bills, especially in response to Facebook’s white paper for Libra. Fears of facing regulation by the SEC probably contributed to changes to Libra’s initial vision of a managed stablecoin based on a “basket of currencies.”
Finman, for one, felt that the Token Taxonomy Act had stalled out. He also said of the new Crypto-currency Act that “I think this is slightly bigger in scope.”
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