The U.S. Senate is re-launching a crypto oversight bill, co-sponsored by Sens. Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (D-N.Y.), which would require crypto exchanges to be overseen by the Commodity Futures Trading Commission (CFTC) and all stablecoin issuers to be regulated depository institutions. This bill would take the U.S. Securities and Exchange Commission (SEC) out of the equation, as it would draw a line between securities oversight and everything else. According to the bill, assets that don’t give the investor a financial interest in a business shouldn’t be considered securities, even if they benefit from entrepreneurial and managerial efforts that determine the value of the assets.
The bill would also set up a self-regulatory organization (SRO) for crypto, described as the consumer protection and market integrity authority. It would demand customers’ assets are fully segregated and impose new risk-management standards for crypto lending, banning rehypothecation in which crypto firms use customers’ assets to stretch their own credit. Additionally, stablecoins would only be issued by banks or credit unions regulated by the federal government or the states.
The bill also includes a definition for decentralized finance (DeFi) that sets strict rules for when a software project strays into a more centralized business effort and then needs to be registered as an exchange. It would also offer tax benefits for crypto investors, including that they don’t have to be taxed on crypto they get from mining, staking, forks, or airdrops until they pocket the new assets.
The bill is designed to find a middle road between the parties, and many of its provisions were drawn directly from proposals from other lawmakers. It would raise $1.4 billion over five years by holding crypto to the same wash-sales tax restrictions that are held over securities.