Senators Cynthia Lummis and Kirsten Gillibrand will introduce a new bill today, aimed at clarifying cryptocurrency regulation in the United States. The revamped Lummis-Gillibrand Responsible Financial Innovation Act proposes to classify most cryptocurrencies as commodities. The legislation aims to mitigate investor losses from the collapse of the crypto industry, as well as enforce strict standards for the listing of new tokens.
The persistent ambiguity of crypto regulation in the United States is about to witness a defining moment. Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) prepare to introduce their revamped cryptocurrency regulation proposal.
The controversial bipartisan bill, known as the Lummis-Gillibrand Responsible Financial Innovation Act, seeks to close the regulatory gap underscoring the crypto industry in the United States.
The Lummis-Gillibrand Act: Regulatory Clarity
A widening dispute between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) over the precise nature of cryptocurrencies has left companies in limbo. Both regulators are exercising their respective enforcement powers against cryptocurrency exchanges Coinbase and Binance.
The Lummis-Gillibrand Act aims to “provide responsible financial innovation and digital assets within the regulatory perimeter.” It designates most cryptos as commodities under the purview of the CFTC, in stark contrast to ongoing SEC enforcement actions.
The legislation affirms an attempt to prevent further turmoil in the cryptocurrency sector, which has seen a series of high-profile crashes that have led to substantial losses for investors in the past two years.
“This legislation is the most comprehensive proposal to date that provides robust consumer protections and appropriately addresses the current landscape surrounding crypto assets,” said Senator Lummis.
The proposed law would force crypto exchanges to store customer assets securely in third-party trusts. Therefore, by prohibiting “proprietary trading” or trading with their own funds on their own platform.
Cryptocurrency Exchanges Must Be Accountable
The US cryptocurrency regulation bill could also mark a regulatory tightening. The rigor would fall on the “material affiliates” of cryptocurrency exchanges. This follows allegations that FTX allegedly lent large sums of client funds to his company Alameda Research. It did so before a liquidity crisis triggered its downfall.
“It is critical to integrate digital assets into existing law and to harness the efficiency and transparency of this asset class while addressing risk… As this industry continues to grow, it is critical that Congress carefully crafts legislation that promotes innovation while protecting the consumer against bad actors,” said Senator Lummis
Additionally, the proposal aims to clamp down on the “remortgaging” of crypto assets. It effectively outlaws high-risk but profitable crypto services like staking. It also imposes stricter standards on new tokens before they are listed on exchanges.
The proposal will be announced today. Given this, a context of significant opposition to the chairman of the SEC, Gary Gensler, arises in the Republican-dominated House, which has already taken steps to reduce Gensler’s influence.
While passage of the US cryptocurrency regulation bill in its existing state or within the current Congress seems doubtful, it marks a significant initial step toward cultivating bipartisan legislation on this crucial issue.
By Audy Castaneda
