Original Source: Alpha Rabbit Research Notes

Original Source: Alpha Rabbit Research Notes

On June 7, 2022, two U.S. senators jointly proposed a Responsible Financial Innovation Act (Responsible Financial Innovation Act) for the encryption field. The bill involves the operation of cryptocurrencies and encrypted assets, as well as the jurisdiction of CFTC and SEC. , stablecoin regulation, banking, tax treatment of digital assets, etc. Previous regulatory changes have had a great impact on the encryption industry, which is one of the reasons why we should pay attention to this bill. In addition to interpreting the bill, the last part of this article describes the comments of Fred Wilson, a partner of the well-known investment institution USV, on the bill (he has not spoken out about the encryption field for several months). We see this article as an international trend, and try to Be objective.

Disclaimer: The content of this article is only for information display and sharing, and does not promote or endorse any operation and investment behavior. This article does not provide any investment advice.

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The United States is a global financial leader. In order to ensure that the next generation of the United States has more advanced opportunities, we have integrated digital assets into existing laws. While working hard to deal with risks, we must make full use of the high efficiency and transparency of digital assets. ——U.S. Senator LummisPresented by Senators Kirsten Gillibrand (D-NY) of New York (D-NY) and Cynthia Lummis of Wyoming (R-WY) on June 7, 2022

Responsible Financial Innovation Act (Responsible Financial Innovation Act) This bill involves the operation of cryptocurrencies and encrypted assets, as well as the jurisdiction of CFTC and SEC, stablecoin regulation, banking business, taxation of digital assets, etc.

The Responsible Financial Innovation Act aims to create a comprehensive regulatory framework for digital assets, and for the time being appears to be taking a crypto-friendly approach, in contrast to governments and regulators that are generally skeptical of cryptocurrencies . The bill mainly emphasizes the flexibility, innovation, transparency, and protection of consumers of encrypted assets and digital assets, and proposes the integration of digital assets into existing laws to provide certainty for the growing Web3 industry.This Act aims to provide digital assetsCreate an integrated regulatory framework that encourages responsible financial innovation.

The Lummis-Gillibrand Act is by far one of the most substantive and comprehensive bipartisan (Democratic and Republican) bills in the United States to provide certainty and clarity to the growing digital asset and blockchain industry.Senator Lummis believes: "The United States is a global financial leader. In order to ensure that the next generation of the United States has more advanced opportunities, we have integrated digital assets into existing laws. While trying to deal with risks, we want to make full use of digital assets. High efficiency and transparency. My hometown, Wyoming, is at the forefront of digital asset regulation in the United States. I want to bring this successful experience to the federal level. With the continuous development of the digital asset industry,

Congress must carefully and deliberately legislate that, while promoting innovation, protect consumers from the wrongdoers."

The Responsible Financial Innovation Act, a bipartisan framework that I co-created with Senator Kirsten Gillibrand, built regulatory clarity for the agencies responsible for overseeing digital asset markets and provided a robust framework for the development of stablecoins. , a tailored regulatory framework, and the integration of digital assets into our existing tax and banking laws. Thank you Senator Gillibrand for your efforts on this legislation and look forward to seeing more of my colleagues join this effort.

“Digital assets, blockchain technology, and cryptocurrencies have experienced tremendous growth over the past few years and, if harnessed correctly, can offer enormous potential benefits. It is critical that the U.S. remains consistent in developing policies to regulate new financial products. play a leading role while encouraging innovation and protecting consumers."

• content pointsHighlights of this legislation are:

• It is possible to resolve the existing dispute between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) regarding the jurisdiction of cryptocurrencies, respecting the opinion of the CFTC.In terms of taxation,

The bill proposes to require the US Internal Revenue Service (IRS) to issue regulations to clarify long-standing problems in the digital asset industry, to exempt capital gains tax on consumption (goods and services) of no more than $200 per consumption, and to allow crypto miners to defer tax on mining or staking. Income tax is paid on digital assets acquired at the time of injection, and no tax is required until the asset is disposed of.

Contents of the bill

secondary title

Key points of the bill (partial)1. The Act Establishes Standards for Defining Digital Assets

, to define which digital assets are commodities and which are securities, and make this judgment by analyzing the purpose of assets and the rights and powers that assets confer on consumers. This definition helps to clarify specific regulatory obligations for digital asset companies .

2. The U.S. Commodity Futures Trading Commission (CFTC) can obtain regulatory authority over the digital asset spot marketThis bill empowers the Commodity Futures Trading Commission (CFTC) to supervise the digital asset spot market. Note that this empowerment is based on the definition of most digital assets as commodities, not securities, by the drafters of the Gillibrand Lummis Act. this means,

If the Gillibrand Lummis Act becomes law, digital assets that meet the definition of commodities, such as Bitcoin and Ethereum, will be regulated by the CFTC.

3. The Gillibrand Lummis Act, which applies to all types of cryptocurrency industry participants

The Gillibrand Lummis Act applies to companies, enterprises, cryptocurrency brokers, and all entities holding licenses issued by government agencies to engage in digital and virtual assets, smart contract business, transactions involving transfer and/or issuance. The scope covered by the Gillibrand Lummis Act includes: cryptocurrency exchanges such as Gemini, Binance, Kraken, etc."Although this Gillibrand Lummis Act does not precisely mention the supervision of decentralized autonomous organizations (DAO), related users and decentralized finance (DeFi) protocols, the bill is as comprehensive as possible, and future DeFi protocols and DAO Might be included in the future as the bill mentions the scope of application"。

A person or entity holding a license, registration or similar authorization as required by law

The Gillibrand Lummis Act (31 USC Section 9801) formally defines"digital assets"、"smart contract"、"smart contract"、"stable currency"、"stable currency"Virtual currency

and various other idiomatic terms in the cryptocurrency industry."a. Briefly summarize,"digital assets"yes"，"Can confer economic, exclusive, or access rights; and, is recorded using a cryptographically secure distributed ledger technology or any similar technology",include",include"，"Virtual Currency and Ancillary Assets, Subject to Section 2(c)(2)(F) of the Commodity Exchange Act"。S.C. 27a）；"Stablecoins for payments, compliant with Section 403 of the Banking Products Legal Certainty Act of 2000 (7 USC 27a)"。

b. "Other Securities and Commodities, Subject to Item A"Digital Asset Broker"refers to the basis"、"Commodity Exchange Act"Securities Exchange Act of 1934"and other"Can carry out market activities related to digital assets"and stablecoins"。

Holders of licenses, registration certificates or other similar authorizations"c. Payment in stablecoins"refers to a digital asset that"，"Notes denominated in U.S. dollars and defined as legal tender are redeemable on a one-for-one basis upon request"，"issued by a commercial entity"，"Accompanied by a statement from the issuer that the asset is redeemable from the issuer or another identified person"Backed by one or more financial assets (excluding other digital assets)",and"。

intended to be used as a medium of exchange"d. The Act will"smart contract"Computer code deployed on a DLT network to execute instructions based on the occurrence or non-occurrence of a specific condition;"or"or"any similar analogs;"and"

e. "May include possession or control of digital assets and transfer of assets or issuing executable orders for these actions."is defined as"digital assets"，"digital assets"，"Used primarily as a medium of exchange, unit of account, store of value, or any combination of such functions"，"not legal tender"Does not derive value from or be backed by underlying financial assets (other than other digital assets)",as well as"

Including digital assets... accompanied by a statement by the issuer that they are based entirely on smart contracts, will maintain a denominated or pegged value and provide upon redemption from the issuer or other identified person.

5. Regarding the protection of stablecoin consumers, regulations on stablecoin issuers

The Gillibrand Lummis Act requires all issuers who pay for stablecoins to have 100% reserves and need to disclose in detail the assets that support stablecoins. Issuers must also ensure that holders can redeem stablecoins with recognized fiat currencies on a 1:1 basis.

6. Consider the national security implications of cryptocurrencies

For example, the Gillibrand Lummis Act has national security considerations for the application of central bank digital currencies issued by other countries and regions.

7. U.S. state uniform law

The law authorizes and directs state banks and regulators to adopt uniform money transfer licensing requirements for transactions involving digital assets within two years.

8. Expanded the scope of the definition of a brokerage institution (Broker)"Broker "The Gillibrand Lummis Act amended Section 6045(c)(1)(D) of the Internal Revenue Code of 1986 to include"defined as"。

Anyone who, in the ordinary course of trade or business (for remuneration), intends to conduct a sale of digital assets at the direction of its customers

9. Tax implications"The Gillibrand Lummis Act will be"buy goods or services"Gains or losses on the disposition of virtual currencies in transactions with individuals, are not included in federal income tax gross income, but involve cryptocurrency gains or losses"Cannot exceed $200

. However, this exemption does not apply to dispositions of virtual currencies for other securities, fiat currencies, digital assets, securities, commodities or cryptocurrencies, whether they result in gains or losses.

10. Focus on energy consumption

The bill proposes that the Federal Energy Regulatory Commission (FERC) needs to analyze and report energy consumption in the digital asset field. Recently, some crypto mining has come under scrutiny for being excessively energy-intensive. Federal Energy Regulatory Commission to Determine Best Ways to Use Mining Technology, Hopes U.S. Can Meet Climate and Clean Energy Goals

Comments from USV founders

The founding partner of USV (one of the investors I admire most), Fred Wilson also mentioned the Gillibrand Lummis Act in his blog: Fred Wilson commented like this:Senators Gillibrand of New York and Lummis of Wyoming jointly introduced a bill to

It aims to transfer most of the supervision of encrypted assets from the US Securities and Exchange Commission (SEC) to the US Commodity Futures Commission (CFTC), which is to admit that these Tokens are more like commodities than securities.Fred Wilson feels that restricting these user Tokens to securities is wrong and will affect most of their functions, which will inhibit the potential of Web3 to reshape the technology industry.

epilogue

epilogueThe Gillibrand Lummis Act aims to provide a prudential regulatory framework for the currently free cryptocurrency industry. but,If the Gillibrand Lummis Act becomes a formal law, will it further promote the mainstream application of cryptocurrencies? Or will it regulate this fledgling industry to the point of non-existence? Only time will tell.

【references】

1.Lummis, Gillibrand Introduce Landmark Legislation To Create Regulatory Framework For Digital Assets | Kirsten Gillibrand | U.S. Senator for New York (senate.gov)

2.Lummis-Gillibrand Responsible Financial Innovation Act proposes comprehensive regulatory framework for digital assets in the United States | Allen & Overy LLP - JDSupra

3.Law Decoded, June 7–13: Lummis-Gillibrand bill is finally here (cointelegraph.com)

4.https://avc.com/2022/06/the-gillibrand-lummis-bill/

5.SEC Chair Gensler Suggests Lummis-Gillibrand Bill May ‘Undermine’ Market Protections (coindesk.com)

6.Senators Lummis and Gillibrand Released Their Crypto Bill Today. What's In It. | Barron's (barrons.com)