In June, Sens. Kirsten Gillibrand (D-N.Y.) and Cynthia Lummis (R-Wyo) introduced the first significant piece of bipartisan legislation on regulating the crypto market. It’s 69-pages and could have big implications on everything from how digital assets are defined (commodities or securities) and what organizations with the government have a say in what aspects of crypto regulation. It could also go nowhere like all other forms of government legislation.
Here’s what we know so far:
As of today, any spending of cryptocurrency is a taxable event. If passed, this bill would render any purchase of goods and services of less than $200 unobligated to a taxable event. This is huge: Lowering the tax barriers for crypto means more adoption of crypto payments across different industries and retailers. Case and point: Check out this graphic from Deloitte outlining that 64% of retailers have plans to adopt crypto payments soon:
Previous bills proposed the limit should be purchases below $600.
When mining crypto, verifying new transactions on the blockchain, or staking, committing your crypto assets to the blockchain, it’s unclear right now when earning from those two activities will incur taxes. The proposed bill would enable both miners and stakers of crypto to hold on to those earnings sans taxes until they exchange it for dollars.
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The bill outlines that the Commodity Futures Trading Commission, as opposed to the Securities Exchange Commision, would be primarily responsible for regulating crypto products. This means that the senators believe crypto operates more like a commodity (think currency) than a security like a stock. This could be a win for crypto proponents: The CFTC is generally seen as more crypto friendly than other government organizations.
While we hate to remind you all of the recent collapse of terraUSD (UST), this bill has safeholders in place to try to prevent the next disaster. It would require all payment stablecoin issuers to have a 100% reserve of assets that are redeemable by investors. Upping requirements for collateral for stablecoin issuers would — theoretically — have prevented what happened to terraUSD.
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The bill is not expected to become law in the current session, but the framework could become the skeleton of how best to oversee crypto markets in the future.
This is not financial advice. If you don't want to spend money investing in crypto or Web3 — you don’t have to. The intent of this article is to help others educate themselves and learn.
Caroline Fairchild is Editor in Chief at BFF
