A United States congressman is the latest working to clarify and determine which U.S. regulator is responsible for which digital assets.
On March 9, Representative Paul Gosar (R-AZ) introduced the “Cryptocurrency Act of 2020”, a bill that looks to choreograph a wide range of digital assets to answer to the appropriate regulator.
The proposed regulatory schema
As Will Stechschulte, Gosar’s legislative assistant explained to the media, “the bill looks to provide not only clarity but legitimacy to crypto assets in the United States.”
Gosar’s proposal divides digital assets into three categories: crypto commodity, crypto-currency, and crypto security. Respectively, the three categories would be governed by the Commodity Futures Trading Commission (CFTC), the Secretary of the Treasury via the Financial Crimes Enforcement Network (FinCEN), and the Securities and Exchange Commission (SEC).
Interestingly, the language of the bill would seem to cement the status of digital assets like Bitcoin as crypto-commodities rather than crypto-currencies. The classification of “crypto-currency” reads “representations of the United States currency or synthetic derivatives” – more reminiscent of stablecoins like Tether (USDT).
The language behind crypto-securities remains familiar: “all debt, equity, and derivative instruments that rest on a blockchain or decentralized cryptographic ledger.”
As to non-fungible tokens, the bill makes no mention.
Updates to the bill since December
The bill is an updated version of one that first leaked in December. The updated bill features expanded definitions for terms like “Decentralized cryptographic ledger” and “Smart Contract” – concepts that U.S. legislators are struggling to cope with.
Possibly more significantly, the updated bill is more explicit about determining “primary” rather than ‘sole’ regulatory responsibility. The exact implications remain to be seen, but the change could weaken the legal standing of crypto businesses arguing that say, the SEC has no right to regulate them.
Industry stakeholder involvement in drafting
Breaking with typical congressional practice, Gosar is presenting the bill solo, without a co-sponsor. Stechschulte told the media that “For the introduction, it’s just going to be Congressman Gosar. After the introduction, we’re hoping to garner some serious support.”
Communications Director for Gosar Ben Goldey explained the emphasis on industry engagement before legislative approval.
Since this is such a niche issue, we worked with stakeholders and outside groups/experts to get a good sense of the kind of clarity that the industry needed. We chase to gather stakeholder support before working toward cosponsors.
One of the industry players involved in drafting the bill was pioneer Bitcoin investor Erik Finman.
Speaking with the media, Finman said he had initially approached Gosar’s team to work on such a bill because “I like that they’re brave and will stand strong for anything.”
Regarding the bill’s history and development from the version that came out in December, Finman said that a number of participants had weighed in:
That bill leaked earlier, we were experimenting with a couple of things, that was our second draft. We’re thirty-two versions away from that.
The past year has seen a number of new draft bills, especially in response to Facebook’s white paper for Libra. Fears of facing regulation by SEC probably contributed to changes to Libra’s initial vision of a managed stablecoin based on a “basket of currencies”.
The nearest peer to Gosar’s new bill is, however, Warren Davidson’s (R-OH) Token Taxonomy Act, initially introduced in 2018 and later updated and re-introduced in April 2019.
Finman, for one, felt that the Token Taxonomy Act had stalled out. He also said that the new Cryptocurrency Act of 2020 is slightly bigger in scope.