Jan 13 (Reuters) – U.S. senators on Monday evening unveiled a bill that would create a regulatory framework for cryptocurrencies that, if signed into law, would clarify financial regulators’ jurisdiction over the booming sector, potentially boosting adoption of digital assets.
The crypto industry has long lobbied for such legislation, often arguing that it is essential to the future of digital assets in the United States and necessary to address fundamental and long-standing problems for crypto companies.
Register here.
Among other things, the legislation would define when crypto tokens are securities, commodities or otherwise, giving the industry much-hoped for legal clarity.
It would also give the US Commodity Futures Trading Commission – the industry’s preferred regulator, as opposed to the US Securities and Exchange Commission – the power to police crypto spot markets.
The bill also gives the banking industry a solution it has been looking for, stemming from legislation enacted last year to create a federal regulatory framework for dollar-pegged crypto tokens called stablecoins.
Bank lobbyists had urged Congress to close what they saw as a loophole in the bill that allowed intermediaries to pay interest on stablecoins. Banks argued that this would lead to a flight of deposits from the insured banking system, potentially threatening financial stability.
Crypto companies objected to the claim, saying that prohibiting third parties, such as crypto exchanges, from paying interest on stablecoins would be anti-competitive.
“What threatens progress is not the lack of commitment from policymakers, but the relentless pressure campaign by big banks to rewrite this bill to protect their own position,” said Summer Mersinger, CEO of the Blockchain Association, a crypto industry trade group.
“Their demands to eliminate stable rewards are designed to stifle consumer choice and kill innovative financial products before they can compete.”
Monday’s bill, which could change as senators consider amendments, prohibits crypto companies from paying interest to consumers solely for holding a stablecoin. However, it allows crypto companies to pay rewards or incentives to customers for certain activities, such as sending a “payment” or “participating in a loyalty program.”
The SEC and CFTC would also be required to issue a joint rule requiring clear disclosures from crypto companies about rewards paid in connection with the use of stablecoins.
‘PRESIDENT OF CRYPTO’
The Senate Banking Committee is expected to debate the bill and consider possible amendments on Thursday. The Senate Agriculture Committee, which is drafting its own version of the bill, will meet later this month to discuss its version.
In a statement, Cody Carbone, CEO of crypto industry trade group The Digital Chamber, said it was “encouraging to see the process continue to move forward.”
“We will remain actively engaged to improve the text as the bill continues to evolve and we are encouraged by the continued momentum to advance a market structure bill this year,” he said.
The industry has spent a lot of money in the 2024 elections promoting pro-crypto candidates in hopes of passing this landmark market structure bill.
This would force crypto companies to rely on regulatory guidelines that could be rolled back under a future administration, industry executives said.
Reporting by Hannah Lang in New York; edited by Michelle Price, Chizu Nomiyama and Nick Zieminski
Our Standards: The Thomson Reuters Trust Principles.
