The FUD About The Cryptoverse On The Part Of Regulators
There is a general behaviour of humans, that makes them resistant to change. This apathy to change is caused by their fear uncertainty and doubt. Humans are always susceptible to the fears of the unknown. Humans are therefore always averse to what they don't understand. This informed the fears, uncertainties and doubts that greeted the crypto space as concerned the regulatory authority.
Of course, whatever cannot be regulated, cannot be deemed to be safe, so also the crypto industry. Therefore the need for regulation in the crypto industry is imperative. Which will douse the fear of risks associated with an investment in these emerging digital assets.
The fear of the risk associated with the cryptocurrencies has made the regulatory authority ignore their laudable use cases and went ahead to resist their adoption. A move that delayed many individuals and institutions from adopting crypto-asset investment for long. Thus lack of regulatory clarity had delayed the adoption of crypto assets by many institutions and individuals.
The authority's lack of acceptance of the cryptoverse and refusal to institute the attendant regulatory framework to further enhance the safety of crypto assets' investment and its development is the reason why the sector had not gained mainstream adoption by all and sundry. There is a piece of good news, the new bill that will accelerate the adoption of the cryptocurrencies mainstream adoption is in the making by the US politicians.
The New US Crypto Bill In The Making
In the US, senator Cynthia Lummis has been at the forefront of crypto regulation and has put together, a bill that will shape the activities of the crypto industry in the United States of America. The positive thing here is, senator Cynthia of the democrat teamed up with senator K. Gillibrand of the Republican party to come up with the bill. Which is supposed to be accepted by both parties in the course of its deliberation, having been prepared by representatives of both parties.
The final draft of the bill was released on 7th June 2022, then presented to the politicians and somewhat met with praise by most stakeholders.
The bill is called the Responsible Financial Innovation Act. The duo of Gillibrand and Cynthia in an interview said the bill will be presented to four legislative committees if approved will be sent to the Senate for a vote and if approved will be sent to the house of representative for a vote, after which, it will be sent to the president to be signed into law. Being that the mid-term elections are around the corner, the bill will be given an accelerated hearing and will be passed into law in no distant time.
The Content Of The New Crypto Bill
The bill commences with definition of three terms, one of them is commodities such as precious metals, the bill described a commodity as an asset which is not a security whose price changes universally base on demand and supply, therefore bitcoin is deemed to be a commodity.
The second term is securities and the bill described securities as assets whose price actions are dependent on a centralised entity therefore all altcoins are described as securities.
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The third term is digital asset. The bill described a digital asset as a natively electronic asset that confers economic, proprietary or access rights or power on its holder and which is recorded using a cryptographically secure distributed ledger or any similar analogue. All cryptocurrencies are therefore deemed to be digital assets.
The bill described payment stable coin as a digital asset that's redeemable on-demand, on a one-to-one basis in instruments in U.S. dollar and defined as legal tender. As always the case, legal tender is deemed to include US government debts. Thus Tether USD(USDT), USDC, BUSD and the likes that are backed with the US dollar and the US government debts fall into this category. For the reason of this definition, payment stablecoin such as DAI and other algorithm stablecoins that are not backed by the US dollar and government debts are to be excluded. Cynthia and Gillibrand in an interview stated that such stablecoins might be classified as securities.
The bill further gives the definitions of terms such as smart contracts and distributed ledgers. The bill went on to describe the issue of taxation on crypto assets. The bill stated that crypto investment will be taxed on capital gains. Capital gain is the profit made from an investment and not the actual capital invested.
The bill described cryptocurrency broker as any person whom for consideration stand ready in the course of ordinary trade or business to effect sales of digital asset at the directions of their customers such as cryptocurrency exchanges and the likes.
The bill also touched on the operation of the decentralized autonomous organisations (DAOs) and their activities. The bill is on the side that, decentralized autonomous organisations have to be registered with the regulatory authority.
The bill stated that airdrops have to be taxed. I believe that will be a bone of contention in the bill. The bill stated that miners and validators are to pay taxes on crypto-assets earned, only when they have been sold. Although this tax is limited to individuals.
The Third Part Of The Bill
The third part of the bill deal with the offering and sales of securities. Most altcoins are categorised as securities. The bill stipulates that, if more than 50% of a token's total supply is held by individuals or institutions in the United States, then whoever creates the token is subject to United States regulations. As such the creator of the token cannot be deemed to be a foreign entity.
Secondly, if the average trading volume of a token exceeds five million dollars per day and the individual or entity that created the token holds more than 10% of the total token supply, then the entity behind the project must provide detailed information to the regulatory authorities. Such information should include but not limited to the basic information behind the project and its creator, the coin or token, its tokenomics and any other associated persons or institutions. The bill stipulates that the securities and exchange commission needs to conduct an in-depth study of the crypto market to determine things like, how much investors need to be educated and how the burden of the companies behind the crypto projects can be reduced.
The Fourth Part Of The Bill
The fourth part of the bill establishes what is known as responsible innovation of commodities. This section of the bill added digital assets such as bitcoin and Ethereum under the commodities regulation and therefore empowered, the commodity and futures trading commission( CFTC) to regulate the Spot market for crypto assets that are classified as commodities, such as bitcoin and Ethereum.
The bill stipulates that crypto exchanges should hold customers' funds under a regulated custodian account and the customers' funds should be kept separate from the exchange funds. The bill hitherto requires the exchanges to register with the commodities and futures trading commission (CFTC) and the US treasury department as money services businesses. The bill further reiterated that crypto exchanges shall permit only the trading of assets that are not readily susceptible to market manipulations. The bill confers emergency powers on crypto exchanges to liquidate, transfer, suspend, or curtail trading in any digital assets as occasion may demand.
The bill stipulates that crypto exchanges cannot sell their customers crypto-assets if they go bankrupt. The bill stated that the commodities and futures trading commission (CFTC) should collect fees from exchanges to offset the cost of digital assets regulations. Though this raises concern, in some quarters, this will increase the already bloated fees cryptocurrency exchanges are subjected to. The bill places the ceiling on the fees that are to be paid by crypto exchanges to be an upper limit of 3 million dollars per annum.
The Fifth Part Of The Bill
The fifth part of the bill establishes acceptable standards for consumer protections which include letting the people know in advance when an application, an exchange or a project will be undergoing an upgrade and how they are making their money. It also stated that absolute transparency must be adhered to, in the area of borrowing, saving and lending. It also states that people should be aware of when a crypto transaction is considered to be final.
The bill dedicated a section to the safe custody of customers' crypto assets by stating that, otherwise required by law, no person shall be under any obligation to use an intermediary for the safekeeping or custody of assets legally owned by that person.
Consequently, if this bill become law, U.S. citizens, we have the legal right to hold the keys to their wallets.
The Sixth Part Of The Bill
The sixth part of the bill was detailed on the issuance and activities of stablecoins. The bill stipulates that all stable coins must be backed 100% by the US-denominated dollar, US government debts and any other asset that falls into these categories.
The bill considers the financial crime and enforcement network ( FINCEN) to be in charge of innovation in the crypto industry and will report politicians and regulators if they see something suspicious. The bill, therefore, empowers FINCEN to oversee the activities of decentralized finance (DEFI).
The Seventh Part Of The Bill
The seven-part of the bill focuses on the Responsible Banking Innovation, which states, that banks and financial institutions should start integrating the new technology into the banking system or else they will be put out of business. In essence, the existing financial system should begin to integrate with the novel blockchain technology to enhance its efficiency.
The bill stipulates that regulators should set standards for the custody of crypto and other digital assets.
The Eight Part Of The Bill
The eighth part of the bill is about the coordination between the various regulators to turn the plan in the bill into action.
The bill calls for the establishment of an advisory committee on financial innovation which will consist of 10 members of which 6 will be appointed by the U.S. president and only two members will be picked from the private sector and the composition of the committee will change every four years and none of the committee members will be compensated for their works, but only travel expenses if there is any.
The committee's powers will be limited to crypto oversights and not enforcement.
THE BIG QUESTION
The bill when signed into law will shape the crypto industry greatly, bearing the fact, that the bill is coming from the US, which is the biggest economy in the world.
Now I want you to state explicitly, the issue that you are impressed with or annoyed you in the bill.
What are the contention parts of the bill and what is your opinion about them? In your opinion, how do you want the crypto industry to be regulated?
Let your voice be heard in the comments section and let us contribute our quota to the bill since it affects every one of us in the crypto space.
Share the article to all and sundry, let them contribute their quota to the bill via their comments and let us forward the comments to the appropriate quarters to effect positive changes to the bill.
