Interpretation of the latest US crypto bill: Exchanges and stablecoins are under pressure, but it is too early to pass

Wu Shuo Author | Tan Shu

Editor of this issue | Colin Wu

1 Contents of the Act

U.S. Representative Don Beyer introduced the [Digital Asset Market Structure and Investor Protection Act](1), saying, “For years, digital asset holders have been subject to widespread fraud, theft, and market manipulation, while Congress has ignored calls from industry experts and federal regulators to create a comprehensive regulatory framework. Our laws have not kept pace with the times, and legislative work is urgently needed to provide basic protections for digital asset holders and investors. This bill is a start.”

This 58-page bill is the most comprehensive bill on digital assets to date. The bill includes the following aspects:

Digital asset securities and digital assets are distinguished from each other in terms of legal definition. Digital asset securities are governed by the Commodity Futures Trading Commission (CFTC), while digital assets are governed by the U.S. Securities and Exchange Commission (SEC).

Require digital asset transfers that are not recorded on the public blockchain to be reported to a registered digital asset transaction repository within 24 hours to minimize the potential for fraud and increase transparency;

It explicitly adds digital assets and digital asset securities to the legal definition of "monetary instruments" in the current Bank Secrecy Act (BSA), formalizing the regulatory requirements for digital assets and digital asset securities to comply with anti-money laundering record and reporting requirements; it explicitly states that digital assets, digital asset securities and stablecoins are not U.S. legal tender, and stipulates that the issuance of stablecoins requires the consent of the U.S. Secretary of the Treasury. Authorize the Federal Reserve to issue CBDC;

Requires the Federal Deposit Insurance Corporation (FDIC), the National Credit Union Administration (NCUA), and the Securities Investor Protection Corporation (SIPC) to clearly inform the public that investing in digital assets and digital asset securities does not provide the same protection as bank deposits or purchasing securities.

2 Features of this bill

Some of the suggestions in Beyer's bill have been considered by regulators before, such as distinguishing the jurisdiction of the SEC and the CFTC. In two aspects, it is innovative.

One is that "digital asset transfers that are not recorded on the public chain must be reported to the registered digital asset trading repository within 24 hours." This applies to internal digital asset transfers of centralized institutions, such as transfers of digital assets before registering an account on Binance. In this case, they need to be regulated, which will put all centralized exchanges under considerable regulatory pressure.

The second is to require the issuance of stablecoins to apply to the U.S. Secretary of the Treasury. This will have a greater impact on the industry. For a long time, the regulatory authorities have been unable to come up with opinions on the supervision of stablecoins, and have been wavering between "multiple management" and "no management". If the issuance of stablecoins in the future requires the prior approval of the U.S. Secretary of the Treasury, it will not only be equivalent to giving the regulatory function to the U.S. Treasury, but will also inevitably bring drastic changes to the cryptocurrency industry.

The rapid development of stablecoins in the past was partly due to the lack of regulation in the industry, which made its issuance mechanism more flexible. However, being included in the regulatory system of the U.S. Treasury Department not only means that the development of stablecoins will lose flexibility in the future, but also means that the asset structure behind stablecoins will become more transparent. From the current situation, this is something that the main issuers of stablecoins in the market, USDT and USDC, do not want to see.

3 The introduction of the bill still faces controversy

Don Beyer has extensive experience in the financial field. Currently, there are four joint committees in the U.S. Senate and House of Representatives, namely the Joint Committee on Economics, the Joint Committee on Printing, the Joint Committee on Taxation, and the Joint Committee on Libraries. Don Beyer serves as the chairman of the Joint Committee on Economics. In addition, during Obama's presidency, he served as the U.S. ambassador to Switzerland and assisted the U.S. Department of Justice in investigating the tax evasion of wealthy Americans through Swiss banks.

Previously, some U.S. congressmen have also made remarks about the need for stricter regulation of cryptocurrencies. Just this Tuesday, Senator Elezabeth Warren urged U.S. Treasury Secretary Yellen: Cryptocurrencies are about to or have already penetrated into all areas of finance, and the Financial Stability Oversight Council (FSOC) should take timely action to regulate cryptocurrencies. The longer there is no appropriate regulatory measures for such assets, the more serious the damage to the financial system in the future.

Don Beyer's bill needs to be discussed and voted on in both the Senate and the House and signed by the President before it can become a formal bill, because even among the members, there are opposition to the bill, such as Republican Senator Cynthia Lummis. According to Bloomberg, her opinion is, "This is a very complex area that is prone to errors. We need a real committee process to consider these issues, rather than drafting them in secret."

Cynthia Lummis is a Bitcoin supporter who holds about 5 BTC. In a previous interview, she once advised Americans to buy Bitcoin as retirement savings.

Of course, Cynthis Lummis’s remarks have attracted opposition. Dave Dodson, who is competing with her for the Wyoming senator position, published a column in the media titled “[Senator Lummis, sell your Bitcoin](3)”. Dodson pointed out that as a senator who is the maker of many of the country’s financial and tax policies, holding Bitcoin would create a huge conflict of interest. If Lummis holds Disney stock and publicly calls on people to buy Disney stock, it would obviously violate SEC regulations. However, holding Bitcoin and publicly calling on people to buy Bitcoin is not illegal at present. This is why this industry needs more supervision. (Header picture from blockchainnews)