U.S. Senators Cynthia Lummis, Kirsten Gillibrand and their team have created a draft for the comprehensive crypto regulation bill. It is unlikely that this bill will become law as it stands, but it could still spark a larger discussion within Congress about what provisions should be included in smaller pieces of legislation.

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The Narrative

The bill, introduced by Senators Cynthia Lummis & Kristen Gillibrand last week, builds on an earlier draft that was introduced a year prior.

Why it matters

Congress is continuing to examine the question of what new laws may be necessary. Regulators are still trying to determine whether crypto assets fall under their jurisdiction.

Breaking it Down

U.S. U.S. Senators Cynthia Lummis, (R-Wyo. ) Kirsten Gillibrand, a Democrat from New York State, and Cynthia Lummis (R-Wyo.) released a revised version of their crypto legislation last week. The bill includes provisions for anti-money-laundering and custody rules. The bill gives the Commodity Futures Trading Commission more authority over crypto-issuers. This would give the Securities and Exchange Commission a clearer role, though perhaps one that is less defined than its current role.

I’m not sure if this version of the Bill has a better chance to become a law than the version from last year. It doesn’t need to become law in order to be successful. This comprehensive bill is still a powerful tool in D.C. if other legislators decide to use parts or even just look at them while they are drafting their own legislation.

The biggest obstacle for lawmakers is, of course, their own colleagues: Congress has not shown much interest in passing crypto-specific laws into law, despite the fact that bills are still being introduced.

It is likely that the House Financial Services Committee will be the first to move any legislation. Markups are expected on the stablecoin and the market-structure bills, which have been introduced in this body.

The bill addresses many of the most pressing questions in the crypto industry. The sections 4 and 5 define some of the most crucial details. In a section by section fact sheet, Section 4 titled “responsible commodity regulation” defines “crypto assets” and “crypto exchanges” under commodities laws. This gives the CFTC jurisdiction over crypto spot markets.

This is the main request of that regulator and it echoes an aim of last year’s version of this bill. Gary Gensler of the SEC chair cautioned against the first draft, saying that it could “undermine” rules governing securities markets. They claim to have incorporated SEC feedback in this new version. This creates a different definition for crypto assets that are not securities, despite the fact they are not decentralized. Their value is determined by “entrepreneurial or managerial efforts”. The SEC has the right to challenge whether a particular asset is a security or not.

Another important provision is the de minimus exemption for payments up to $200. Another major problem for the industry is that every transaction, no matter how small, faces a capital gain/loss tax. Tax liabilities are the same for someone buying a $2.50 cup of coffee as they are for someone transacting with crypto worth thousands of dollars.

The IRS and individual taxpayers are both affected by the current tax regulations. This kind of provision would address the concerns.

Some of these provisions are similar to bills or regulatory issues that we have seen before. There are definitions of stablecoins and algorithmic stablecoins; anti-money laundering regulations; the definition of “broker” in tax terms, as well as finality of settlement.

This bill will likely spark some debate, regardless of whether it becomes law. You can share your thoughts on the different provisions, whether you believe something is unclear, unnecessary, or will benefit the industry. You may find your comments in the next edition of our newsletter if you reply to this email.

  • Asset tokenization will be one of the topics discussed at the Global Markets Advisory Committee meeting, which takes place on Wednesday, September 9th at 13:00 UTC.

  • A omnibus hearing will be held by the federal court that oversees Celsius’ bankruptcy at 14:00 UTC (11 a.m. ET).
  • The CFTC Technology Advisory Committee meets at 16:00 UTC (12 p.m. ET) to discuss decentralized financing and related topics.

  • An omnibus hearing will be held at 17:00 UTC (1 p.m. ET) by the federal court overseeing FTX’s bankruptcy.

  • ( Reuters ). According to Reuters, lobbyists and crypto firms are working together to gain support for crypto legislation.
  • ( Washington Post ) Gizmodo has published a piece written by an artificial intelligence tool. The editor who claimed he had not seen the story before publication found 18 errors almost immediately. Naturally, reporters and staff were upset that the site published an AI-written article.

Yes. (Josh Cincinnati/Twitter)

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Next week, we’ll see you all!

Pete Pachal is the editor.