The proposal gives the CFTC a leading role and pushes for the creation of a self-regulatory organization like FINRA.
Lynn Johannson, Advisor, Sustainability and ESG
January 4th, 2024
Lynn Johannson, President of E2 Management Corporation and Catalyst for THE Collaboration
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The Lummis-Gillibrand Bill Puts the CFTC in Charge: A Win for the Crypto Industry
Protocol | Benjemin Pimental | Jun 7, 2022
The proposal gives the CFTC a leading role and pushes for the creation of a self-regulatory organization like FINRA.
The Responsible Financial Innovation Act, introduced by Republican Sen. Cynthia Lummis and Democrat Kirsten Gillibrand, lays out how cryptocurrencies should be defined and regulated. If it becomes law, it would be a victory for the crypto industry, which has long complained about insufficient or vague regulations governing digital assets and what it sees as the SEC’s aggressive enforcement-first posture.
- The bill supports positions endorsed by the crypto industry, including the key argument that many cryptocurrencies should not be subject to securities regulations.
- As was revealed in a leaked version of the bill, Lummis and Gillibrand would hand over key oversight responsibility to the CFTC, not the SEC, which has been known for aggressive enforcement actions against crypto companies under Gensler.
- The bill would also require the CFTC and SEC to lead a study of creating a “self-regulatory organization” that would play “a complementary role, working with regulators to allow them to be more nimble and efficient, while maintaining strong supervision.”
- The bill also resolves some regulatory gaps, clarifying everything from the tax treatment of crypto transactions to the reporting requirements for crypto companies.
- People could make purchases with appreciated virtual assets “without having to account for and report income” up to a certain threshold.
- Miners, node operators and other crypto-transaction participants will not be considered “brokers” for income tax purposes, which would impose reporting requirements on them.
- Calls for the creation of a federal regulatory sandbox and the bill also calls on the Federal Energy Regulatory Commission to “analyze and report” on energy consumption in the digital assets market.
See: Yellen Renews Call for Stablecoin Regulation After Terra’s algorithmic stablecoin tumbles
Some Reactions
- The Wyoming senator, one of crypto’s staunchest advocates who disclosed that she held more than $100,000 in bitcoin last year, said in a statement that it is “critical that Congress carefully crafts legislation that promotes innovation while protecting the consumer against bad actors.”
- Gillibrand, who represents New York, said the bill offers a framework that “spurs innovation, develops clear standards, defines appropriate jurisdictional boundaries and protects consumers.”
- Crane said the Lummis-Gillibrand bill offers “a thoughtful approach” to crypto regulation and “proposes to establish a mature regulatory framework that would empower regulators to bring digital asset markets more in line with existing regulated markets.”
- Fagel also called the proposal “a step in the right direction.”
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