- Legislators are set to propose a bipartisan framework for regulating cryptocurrencies.
- Senators Kirsten Gillibrand and Cynthia Lummis unveiled the Responsible Financial Innovation Act.
- The bill would have the Commodity Futures Trading Commission overseeing major crypto spot markets.
Bitcoin, ether, and the approximately 19,764 other cryptocurrencies in existence today could soon be regulated under a clearer framework after having more or less roamed free since bitcoin's introduction in 2009 — and it could set clearer guidelines over which regulator actually has the most oversight of the space.
Senators Kirsten Gillibrand and Cynthia Lummis unveiled bipartisan legislation for the cryptocurrency market on Tuesday, dubbed the Responsible Financial Innovation Act.
The framework would create "regulatory clarity for agencies charged with supervising digital asset markets, provide a strong, tailored regulatory framework for stablecoins, and integrate digital assets into our existing tax and banking laws," Lummis said in a joint press release with Gillibrand.
That's likely welcome news to both the regulators and the broader crypto community, as both sides have been advocating for more regulation to protect investors and fuel innovation in the sector.
One major piece of clarity that comes from the proposed bill is which regulator will oversee crypto, as the Securities and Exchange Commission and the Commodity Futures Trading Commission have been at odds over which agency is responsible for policing the crypto sector.
The answer is both, if the bill gets passed as a law.
"Understanding that most digital assets are much more similar to commodities than securities, the bill gives the CFTC clear authority over applicable digital asset spot markets, which aligns well with their current purview over other commodity markets," the senators said. That means bitcoin, ether, and other major crypto tokens will be regulated by the CFTC.
Meanwhile, the SEC would maintain its regulatory oversight of digital assets that give investors a right to profits, liquidation preferences, and other financial interests in a business entity. Companies that sell digital assets to raise money would be required to file disclosures with the SEC, similar to what is required today for stock offerings.
For stablecoins, the bill would protect consumers by making all stablecoin projects required to establish 100% reserve, asset type and detailed disclosures. "This guarantees that a payment stablecoin holder can always redeem the stablecoin in exchange for the equivalent dollar value," the senators said.
That type of protection in stablecoins may have helped protect investors from the implosion of TerraUSD last month, which was an algorithmic stablecoin that lost investors tens of billions of dollars. If passed, the regulation could also help end speculation of what Tether, the world's largest stablecoin, holds in its more than $70 billion reserves.
The proposed changes are considered to be friendly to the crypto industry, and could help boost innovation in the space, but the timeline of this bill turning into a law could take years serious momentum between both democrats and republicans materializes.