(Part 2 of 2 in our Cryptolegislation Series)
Over the course of 2022, Cryptocurrency has continued its rise from an obscure subject of niche bloggers to an increasingly mainstream policy issue on Capitol Hill. Here are 6 major pieces of cryptocurrency legislation proposed since the start of 2022, along with their sponsors.
This act was first proposed March 31st, 2022 by Sen. Pat Toomey (R). I say proposed because rather than being introduced formally, the bill was circulated in draft form for comment by Senator Toomey’s office, hence the lack of an official bill number in the above title.
Given that Senator Toomey is not running for reelection this November, his influential place as the ranking member on the Senate Banking Committee is less of a boost to the proposal than it might otherwise have been. Nonetheless, the text received significant press and analysis when it was issued, and law firms like Paul Hastings and Cravath Swaine & Moore wrote about its provisions.
The proposal would limit the issuance of stablecoins to banks already insured by the FDIC, people designated by state banking authorities as a “money transmitting business” and those who receive a license from the Office of the Currency Comptroller. This pleased some of the crypto community because they feared only banks would be allowed to issue stablecoins.
Most of the licensing and management regime would occur under the authority of the Office of the Currency Comptroller (OCC). It would have significant discretion on handing out these licenses, though there is an appeals process for those who are denied.
The bill would also clarify that stablecoins are not under SEC jurisdiction and are not securities. It would require those issuing them to maintain reserves of ordinary funds sufficient to meet the value of all outstanding stable coins.
It is also unusual among many of the proposed acts in that it includes certain privacy protections. These were likely added in collaboration with some of the cryptocurrency lobbying associations, who were consulted on the language of the draft before it was made public.
2. The Russia Cryptocurrency Transparency Act (H.R. 7338)
First introduced March 31st, 2022 by Rep. Gregory Meeks (D), this bill proposed that a “Director of Digital Currency Security” be appointed in the State Department to oversee cryptocurrency-related matters. Specifically, the Director would be responsible for determining how best to use cryptocurrency to aid Ukraine while preventing Russia from using cryptocurrency to evade U.S. and international sanctions. The State Department would also have to notify Congress before using cryptocurrency to pay out any rewards for information.
3. The Stablecoin Transparency Act (S.3970) / (H.R. 7328)
Also introduced on March 31st, 2022, versions of this bill were proposed in the House and Senate simultaneously by Sen. Bill Hagerty (R) and Rep. Trey Hollingsworth (R). The act would require stablecoin issuers to hold reserves in “(1) certain government securities; (2) fully collateralized security repurchase agreements, or (3) U.S. dollars or other non-digital currency” and to publish monthly reports to their website.
4. The Cryptocurrency Accountability Act (H.R. 7862)
First introduced April 20, 2022 by Rep. Elissa Slotkin (D), this bill stands out from the pack in that it’s less about regulatory policy or macroeconomics than a piece of the ongoing debate over the ethics of members of Congress profiting financially from their insider knowledge. Much like legislation seeking to curb insider stock trading by congressional representatives and their immediate family, it proposes to require Members of Congress to disclose any holdings above $1,000 they or their immediate family have or have had in cryptocurrency in the past year under a very broad definition of cryptocurrency. This may have been in response to recent allegations that some members of Congress have profited by promoting certain types of cryptocurrency, at least one instance of which has triggered an ethics investigation.
Introduced on June 7th, 2022 by Sen. Cynthia Lummis (R-WY) and Sen. Kirsten Gillibrand (D-NY), this bipartisan bill probably garnered the most press coverage of any proposal on this list. It was an attempt to deal with many of the issues facing cryptocurrency in one large, thorough legislative proposal, and some of its provisions clarifying current financial laws won the support of the crypto community.
It’s a long bill that seeks to define nearly every term relevant to blockchain, cryptocurrency and related technologies like stablecoins. The crypto community liked that it clarified that, although digital “brokers” have many of the same duties as regular brokers, a number of crypto-related activities such as selling related hardware and software and validating “digital ledgers” do not necessarily make someone a broker.
Like a number of the other bills, this proposal contains a breakdown dividing responsibilities for digital assets between the CFTC, SEC and Treasury Department. Those assets include NFTs (Non-Fungible Tokens) and stablecoins. The bill also clarifies some of the outstanding issues involving digital assets and their relationship to taxation.
Though it won praise from some quarters, other parts of the crypto community harshly criticized the bill, and it failed to get off the ground at least in this particular congressional session. Its prominence when it was introduced and bipartisan backing mean the bill’s text will likely be a serious point of reference in any discussions about writing crypto legislation going forward, however.
6. The Digital Commodities Consumer Protection Act (S.4760)
Introduced August 03, 2022 by Sen. Debbie Stabenow (D) and Sen. John Boozman (R) this bill came from the Senate Agriculture Committee, which has jurisdiction over the CFTC. Unsurprisingly, it sides with the CFTC in the great struggle over where crypto regulation will ultimately land. It’s another attempt at a comprehensive categorization and enforcement system, though it specifically excludes securities, and it would require trading organizations, dealers, brokers and custodians to register with the CFTC, though merely mining cryptocurrency would not trigger a need to register.
It allows for dual registration with the SEC in some cases, though, and allows the CFTC to delegate some of its regulatory authority to one of any number of Regulatory Futures Associations (RFAs), which market participants would be required to jointly form and operate.