While the House is on its August break the Senate has been in session continuing to make waves in the crypto space. The different pieces of legislation that have been introduced and the others which have been discussed range from very line item specific changes to monumental changes from current policy. After watching in person the House bill on Stablecoins fall apart I certainly did not expect to see the Senate drop two different bipartisan bills in the last week but low and behold here we are. In this article I want to cover the two bills that have been introduced in the last week, the bill being crafted behind the scenes, and lastly, some comments made publicly by a Senator that gives us insight into what is going on.
The first bill that was introduced recently in the Senate was one that I have previously written about in an article that you can find here. This legislation was introduced by Senator Patrick Toomey (R-PA) and Senator Kyrsten Sinema (D-AZ) and is called the Cryptocurrency Tax Fairness Act. As I had mentioned earlier this bill is specific and focuses on just a couple of things. Currently, every single crypto transaction is supposed to be taxed due to its current status as an asset. This legislation would exempt reporting crypto transactions of less than $50 or trades in which a person earns less than $50. While this amount is lower than the $200 that has been discussed this would at least do something to help cut back on the number of transactions someone would have to report by eliminating the dust transactions that people rack up over the year.
Today the second bipartisan bill in a week was introduced in the Senate. In a little bit of a twist to what someone would expect this bill was introduced by the Senate Agriculture Committee Chair Senator Debbie Stabenow and Ranking Member Senator John Boozman. It is interesting to see that this legislation has originated with members who have not been at the forefront of crypto policies and they also are members of the Agriculture Committee instead of a committee like Financial Services or Ways and Means like you would traditionally expect. Unlike the previous piece of legislation, this bill would fundamentally change the way that cryptocurrencies are looked at and regulated. Called the Digital Commodities Consumer Protection Act of 2022 this legislation would make the Commodities Future Trading Commission (CFTC) the default regulator for cryptocurrency as opposed to the Securities and Exchange Commission (SEC) the regulator currently throwing its weight around. While the SEC is a known name when it comes to financial regulation the CFTC is not known by many even though they are an equally important regulator. The CFTC already deals with future contracts that can move 24/7 and deal with a spot market as opposed to the SEC which deals with markets that have business hours and close in the evening. Recently more and more individuals in the crypto space and the government have talked about how the CFTC would be a much better fit for crypto instead of the SEC and after looking into the two regulators I have to agree.
In the background, there has also been another bill being crafted though it is unlikely to receive any bipartisan support like these two other bills discussed have. Senator Elizabeth Warren stated previously at the end of July that she plans to introduce new legislation aimed at combating crypto scams that target novice investors. This came up during a recent hearing at the Senate Banking, Housing, and Urban Affairs Committee which she sits on. Senator Warren has been vocal for months much to the dismay of some of her party members about how she is against cryptocurrencies without very strict and very invasive government regulations. In this same vein Senator Sherrod Brown, the Chairman of the Banking, Housing, and Urban Affairs Committee, has come out calling for regulators to do a better job at protecting crypto investors and consumers. While he has not proposed anything, in particular, to do this as the head of this powerful Senate Committee it is a sign of things to come. Members in both the Senate and the House have now seen crypto run into the same issues for roughly the last year and a half and nothing has really been done to address it. It is safe to say that Members are getting antsy to see regulators do something and with the mid-term elections coming up passing something to address this would be a huge win for them to take back and campaign on. While Senator Brown was pushing for the SEC to do more that is not a universal feeling as seen with Senator Toomey at the same hearing criticizing the SEC for not only not showing up to the hearing in light of the recent string of bankruptcies. The SEC failed in light of the bankruptcy of Voyager since that was a publicly traded company so the SEC had access to all of this information and yet did not do anything to address what the public has now been able to see are some crazy bad loans. Since they are the ones who really regulate the stock market and approve or flag companies when they are both reporting their number or filing to go public it causes some pretty intense backlash in some circles to grant this regulator more power for this agency.
No one wants to hear it but legislation is coming targeting the crypto space whether we like it or not. With an abundance of options available to Congress, it is my stance that no one piece of legislation does too much all at one time. The smarter option would be to take a stair-step enact wait-and-see approach to see what the impacts are and then address whatever issues emerge or remain after the fact. This will prevent any sort of innovation smothering effect that could occur and will give everyone time to adjust without ripping the band-aid off so to speak. With mid-terms approaching Congress has even less time than normal once everyone comes back from break. My hope is that we do not ram something through without looking at what could occur.
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