Bipartisan push for cryptocurrency bill, industry insiders hail as milestone, financial reform groups criticize, what are the highlights?

U.S. Senators Kirsten Gillibrand and Cynthia Lummis announced on Tuesday a cryptocurrency and fintech startup bill that they have been drafting since the end of last year. The majority of the provisions are favorable to the crypto industry, and the announcement has been well-received by professionals in the field. Let's take a look at the potential impact the bill will have on the cryptocurrency market.

Responsible Financial Innovation Act

The "Responsible Innovation" bill, in line with previous Biden administration orders, is a bipartisan legislation co-drafted by Senator Kirsten Gillibrand, a member of the Senate Agriculture Committee from the Democratic Party, and Senator Cynthia Lummis, a member of the Senate Banking Committee from the Republican Party, hence the bill is also known as the "Lummis-Gillibrand."

Favorable to the crypto industry, and with bipartisan members creating the bill, it further increases the potential for passage. However, the bill is still in its preliminary stages with many details yet to be finalized. Here are the key points:

1. Clearly Define Cryptocurrency Assets

The bill aims to define which cryptocurrency assets should be classified as commodities or securities, enabling asset issuers to determine their regulatory obligations and regulators to understand whether securities laws or commodity trading laws should apply.

2. Grant Regulatory Authority to the CFTC

As most assets are closer to commodities than securities in nature, the bill advocates granting regulatory authority to the U.S. Commodity Futures Trading Commission (CFTC), with high market value assets like BTC, ETH to be regulated by the CFTC.

3. Define Stablecoin Issuance Standards

The bill requires stablecoin issuers to establish a 100% reserve, disclose reserve asset types and details, and formulate a "Special Deposit Institution Charter" based on state laws and the National Bank Act for issuance standards.

Aligning with Senator Cynthia Lummis's previous stance, she believes it is wrong to limit stablecoin issuance to "custodial banks" only, as FDIC insurance may not apply to stablecoins, and having 100% reserve assets stored in the Federal Reserve Bank is sufficiently secure.

4. Establish an Advisory Committee

The advisory committee can authorize specific regulatory agencies to provide legislators with relevant recommendations on the progress of innovations to maintain the relevance and effectiveness of regulations. It will consist of various stakeholders, including:

• Crypto industry
• Lobbying groups
• Financial experts
• Consumer protection experts
• Federal and state regulatory agencies

5. Cryptocurrency Service Providers to Disclose Specific Details

Ensuring consumers fully understand the products they purchase, their ownership rights, associated risks, service providers also need to disclose code and details of cryptocurrency lending.

6. Research Energy Issues

The bill instructs the Federal Energy Regulatory Commission to regularly analyze and report on the energy consumption of the crypto industry, focusing on deploying more renewable and clean energy in cryptocurrency mining activities.

7. Establish Internet Security Guidelines

The CFTC will collaborate with the SEC, Treasury Department, and the National Institute of Standards and Technology (NIST) to develop the most comprehensive internet security guidelines for digital asset intermediaries.

This includes identifying potential evasion of sanctions, money laundering, terrorism financing, and other risks.

8. Regulatory Sandbox

Federal and state-level regulatory agencies will be able to collaborate with financial institutions to introduce new products into the market under certain restrictions.

9. Minimum Tax Exemption System

To make it easier for the public to adopt cryptocurrency assets in daily life, the bill advocates for a minimum tax exemption system, with a minimum exemption amount for payment, relieving the public from tax concerns.

The bill also emphasizes that miners and node validators are not trading brokers, and the block rewards they receive cannot be taxed until they are cashed out.

10. Introduce Retirement Plans

The bill requires the U.S. Government Accountability Office (GAO) to analyze the potential opportunities and risks of introducing cryptocurrency assets into retirement savings plans, with the results reported to Congress, the Treasury Department, and the Department of Labor.

11. CBDC

The bill requires the following institutions to collaborate and conduct in-depth research on digital currencies:

• The Office of Management and Budget (OMB)
• The Cybersecurity and Infrastructure Security Agency (CISA)
• The Director of National Intelligence (DNI)
• The Department of Defense (DoD)

Comments from Various Sectors

Jake Chervinsky, former legal counsel for Compound and current Policy Lead for the Blockchain Association

Jake Chervinsky believes the highlight of the bill is making the CFTC the primary regulatory agency for the cryptocurrency spot market and correcting the unfriendly definition of "trading brokers" in last year's infrastructure bill.

Dennis Kelleher, Executive Director of a non-profit and financial reform group

Dennis Kelleher heavily criticized the bill, stating that the crypto industry seeks CFTC as the regulatory agency because it is the least funded and smallest regulatory agency.

Mark Hays, analyst at Americans for Financial Reform (AFR), stated that most legislators rushing to introduce bills under the guise of promoting innovation could lead to the legalization of misconduct. Moreover, claiming that the industry of innovation will inject a large amount of money into politics does not mean it should have special regulations.