Amid crypto turmoil, senators propose sweeping oversight

Wide-ranging bipartisan legislation unveiled Tuesday would regulate cryptocurrencies and other digital assets following a series of high-profile busts and failures.

It’s unclear, though, whether the bill proposed by Senators Kirsten Gillibrand, D-NY, and Cynthia Lummis, R-Wyoming, can clear Congress, especially at a time of heightened partisanship ahead of midterm elections. The bill also comes as advocates for cryptocurrency have become bigger – and more free-spending – players in Washington.

The bill, called the Responsible Financial Innovation Act, proposes legal definitions of digital assets and virtual currencies; would require the Internal Revenue Service, IRS, to adopt guidance on merchant acceptance of digital assets and charitable contributions; and would make a distinction between digital assets that are commodities or securities, which has not been done.

The bill “creates regulatory clarity for agencies charged with supervising digital asset markets, provides a strong, tailored regulatory framework for stablecoins, and integrates digital assets into our existing tax and banking laws”, Lummis said in an emailed statement. Stablecoins are a type of cryptocurrency pegged to a specific value, usually the US dollar, another currency or gold.

Lummis has been a vocal advocate for cryptocurrency development and has invested between US$150,002 and US$350,000 in bitcoin, according to her financial disclosure.

The legislation imposes disclosure requirements on digital asset firms to ensure that consumers can make informed decisions, delineates agency responsibilities over various digital assets – such as Commodity Futures Trading Commission jurisdiction over bitcoin – and requires a study on digital asset energy consumption, among many other proposals.

The bill comes at a tumultuous time for cryptocurrencies, including the May meltdown of the terraUSD stablecoin and luna, the coin meant to buy and sell assets, which traded at a value of less than one ten-thousandth of one cent.

Gillibrand said the bill establishes “a regulatory framework that spurs innovation, develops clear standards, defines appropriate jurisdictional boundaries and protects consumers”.

These developments have prompted lawmakers on both sides of the aisle to support legislation that more closely scrutinises digital assets.

And crypto lobbying has followed suit. This year, for the first time, industry executives have flooded money into congressional races, spending US$20 million, according to records and interviews.

Despite the risks, surveys show that roughly 16 per cent of adult Americans, or 40 million people, have invested in cryptocurrencies. And 43 per cent of men age 18-29 have put money into cryptocurrency.

African-Americans are also more likely to invest in cryptocurrencies than caucasians.

AP