- July 14, 2023
- Posted by: [email protected]
- Category:
Senators Cynthia Lummis and Kirsten Gillibrand of the United States are reintroducing legislation to provide a comprehensive regulatory framework for digital assets. The Responsible Financial Innovation Act will be introduced to the Senate on July 12 after being tabled in the previous session of Congress for over a year. This bipartisan initiative seeks to clarify the functions of regulatory authorities like the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) while simultaneously prioritizing consumer protection.
The Lummis-Gillibrand bill was first submitted in June 2022, during a difficult period for the crypto space that saw prominent firms go bankrupt and token prices plummet significantly. It tries to address the fallout from these events. The proposal has been revised to include changes to the US tax code, allowing the crypto industry to contribute to its own monitoring. Furthermore, the bill sets protections to prevent another incident similar to the collapse of FTX, a major crypto exchange that failed in November 2022.
The collapse of Terraform Labs, a South Korea-based firm whose stablecoin lost its peg to the U.S. dollar, prompted the drafting of the Lummis-Gillibrand bill. Consequently, the legislation will require payment stablecoins to be issued exclusively by depository institutions.
Critics have accused U.S. regulators of providing insufficient clarity, which could enable firms to operate without fear of enforcement actions or crackdowns. The bipartisan nature of the Lummis-Gillibrand bill has garnered praise from many within the industry, especially at a time when certain elected officials have politicized aspects of the crypto space. Examples include Senator Elizabeth Warren, who has emphasized the illicit uses of digital assets, and Florida Governor Ron DeSantis, a 2024 presidential candidate, who has called for a ban on central bank digital currencies.
While the Responsible Financial Innovation Act presents one approach, members of the House of Representatives have proposed alternative legislation to address the regulation of cryptocurrencies. A discussion draft released in June aims to limit the authority of the SEC over crypto firms, while the House Financial Services Committee has drafted legislation proposing that the Federal Reserve become the primary regulator responsible for establishing requirements for stablecoins.
