Inventory of Seven Bills that Could Determine the Future of Cryptocurrency in the United States

Key Bills Shaping the Future of Cryptocurrency in the US

Author | DL NEWS

Translation | Garyma Wu on Blockchain

Original Article Link:

https://www.dlnews.com/articles/defi/us-lawmakers-are-working-on-a-slew-of-crypto-and-defi-bills

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Cryptocurrency leaders often call for regulatory clarity to reduce industry uncertainty.

However, some cryptocurrency bills currently being passed by US legislative bodies (see figure below) may provide more than they expect, potentially shaking the foundations of decentralized finance by enforcing stricter regulations.

Some of these efforts reflect the desire of the crypto community to operate clearly under tailored regulations.

Others show legislators’ concerns about money laundering, consumer protection, and decentralization.

Let’s take a detailed look at the seven bills being brewed on Capitol Hill.

First: 21st Century Financial Innovation and Technology Act

In late July, as the industry celebrated the passage of two cryptocurrency bills by two congressional committees, bringing them one step closer to becoming law, concerns seemed to have faded away.

One of them is the 21st Century Financial Innovation and Technology Act, which Coinbase CEO Brian Armstrong referred to as the “Protecting your Cryptocurrency, American Innovation, and National Security Vote.”

This bill will provide new trading rules for cryptocurrency exchanges and make the Commodity Futures Trading Commission the primary regulatory agency for cryptocurrencies in the United States.

However, the bill has faced criticism from Democrats and consumer advocacy groups, partly due to the lack of ensuring additional funding for the Commodity Futures Trading Commission to fulfill its responsibilities.

In the debate before the bill passed the House Financial Services Committee, Democratic Representative Stephen Lynch from Massachusetts called it the “worst legislation submitted in the past 20 years.”

Second: Stablecoin Clarity Act

The Stablecoin Clarity Act aims to establish a legislative framework for issuing payment stablecoins.

According to the bill, stablecoin issuers must be regulated companies, like banks, and must maintain a one-to-one ratio of safe asset reserves to support the stablecoin.

The bill passed the House Financial Services Committee vote and entered broader discussions in the House, but only after heated debates at the end of July.

Republican House Financial Services Committee Chairman Patrick McHenry and the committee’s top Democrat, Maxine Waters, have negotiated this bill for a year and a half. However, Waters and other Democrats have significant objections to the bill.

In the debate, Waters said that although her team and the government disagreed with the current form, McHenry still hurriedly passed the voting version.

Democrats oppose the provision of the bill that stablecoin issuers can obtain licenses from state and federal regulatory agencies.

Waters said that states may attract issuers by lowering reserve requirements, undermining the overall goal of the bill.

Third: Lummis-Gillibrand Responsible for the Financial Innovation Act

The Lummis-Gillibrand Responsible for the Financial Innovation Act is the result of bipartisan cooperation and also spans two committees in the Senate.

It is the cooperative achievement of Republican Senator Cynthia Lummis and Democratic Senator Kirsten Gillibrand, with Lummis being a member of the Banking Committee and Gillibrand being a member of the Agriculture Committee.

These two senators proposed the bill in the previous congressional term, but they reconsidered it after the collapse of FTX Exchange.

In mid-July of this year, they launched a new version, which added consumer protection measures for cryptocurrencies.

The bill, nearly 300 pages long, covers various aspects of the cryptocurrency industry, from stablecoins to ATM operators, from exchanges to mixing services. It provides legal definitions of key terms, including “cryptocurrency” and “decentralized exchange.”

But the most important provision of the bill is that cryptocurrency exchanges must be registered with regulatory agencies, most likely the Commodity Futures Trading Commission.

However, the Securities and Exchange Commission has been given more power to enforce consumer protection.

Miller Whitehouse-Levine, CEO of the Decentralized Finance Education Fund, told DL News that the Lummis-Gillibrand Act is inspiring, but there are also some concerns.

Among them, he said, the bill has some doubts about self-hosted wallets.

According to anti-money laundering and know-your-customer regulations, centralized cryptocurrency exchanges and wallet providers must identify customers.

But self-hosted wallets are still controlled by users, providing anonymity.

The Lummis-Gillibrand Act does not completely ban these wallets, but when interacting with customers holding these wallets, exchanges will need to comply with new standards related to “anti-money laundering, customer identification, and sanctions.”

For many DeFi users, this scrutiny eliminates the entire purpose of self-custody.

Whitehouse-Levine said, “In our view, self-custody is the fundamental innovation of digital assets – without it, there would be no cryptocurrencies or things like DeFi.”

“We hope to ensure the ability to always protect self-custodied assets and be able to be protected in any legislation, preferably welcomed.”

Item 4: Encryption Asset National Security Enhancement and Law Enforcement Act

Another bipartisan bill in the Senate, the Encryption Asset National Security Enhancement and Law Enforcement Act (CANSEE), was introduced in mid-July.

Led by co-sponsor Senator Jack Reed, the bill targets DeFi and cryptocurrency ATMs. The authors of the bill state that these technologies enable illicit financing and money laundering by bad actors similar to the North Korean government.

The bill essentially requires DeFi services to comply with AML and sanctions compliance obligations similar to banks and centralized exchanges.

DeFi services must develop AML programs, identify their users, and report suspicious transactions.

It grants the Treasury Department new powers to determine who should be held accountable for violations, including project developers and funders.

Cryptocurrency advocates have fiercely criticized this bill, claiming that it will make the development of DeFi impossible.

Lars Seier Christensen, the founder and CEO of blockchain company Concordium, told DL News that if the bill passes, it will create significant problems.

He said, “I don’t quite understand the way it’s being proposed.”

The broad powers granted to the Treasury Department would undermine the fundamental principle of DeFi technology – decentralization, Christensen added.

“The passage of the bill could ultimately result in the Treasury Secretary exerting strict control over many projects, making the DeFi industry completely subject to government institutions and more centralized than the traditional financial industry itself.”

Item 5: Cryptocurrency ATMs and Defense Budget

The U.S. Senate recently passed a record-breaking defense budget bill with strong bipartisan support.

This bill includes anti-money laundering legislation with a focus on cryptocurrencies.

The bill sets new provisions that require cryptocurrency ATMs to collect identity information from users.

This bill combines the provisions of the Lummis-Gillibrand bill with the provisions of the Digital Asset Anti-Money Laundering Act by Democratic Senator Elizabeth Warren and Republican Senator Roger Marshall.

The defense bill is likely to face significant resistance in the House of Representatives.

Items 6 and 7: Blockchain Regulatory Clarity Act and Keep Your Coins Act

Two short bills introduced in the House of Representatives were bundled together with other bills and voted out of the committee at the end of July, so they will now be submitted for consideration by the entire House of Representatives.

One of them is the Blockchain Regulatory Clarity Act initiated by House Majority Assistant Leader Tom Emmer.

The bill confirms that blockchain developers who do not hold customer assets will not be classified as money transmitters under state laws or as financial institutions under federal laws, and therefore do not need to register or obtain licenses.

Another initiative is the Keep Your Coins Act initiated by Congressman Warren Davidson.

Davidson stated that the purpose of this act is to protect the privacy of Americans when transacting with cryptocurrency assets.

Specifically, it safeguards the rights of cryptocurrency users to retain digital assets in self-hosted wallets.

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