A Look at the Biggest Crypto Bills in Congress
The last several months in crypto have focused on the bear market, enforcement by agencies like the U.S. Treasury and Department of Justice, and liquidity issues surrounding crypto lending firms. But a predominantly overlooked movement is the growing amount of proposed legislation in the U.S. Congress. According to Forbes, over 50 digital asset bills have been introduced in the 118th Congress.
This is by no means surprising. Crypto permeates foreign policy, consumer protection, monetary policy, and the hot debate between its designation as a security or commodity. The multiple policy impacts coupled with emerging technologies, such as NFT’s and crypto banks, makes this a complex but fascinating path for D.C. policymakers to navigate.
Most Recent Bills of Note
In the past three months, two major bills have been introduced to Congress, and two are in the pipeline:
The Digital Commodities Consumer Protection Act: Introduced earlier this month, this bill was sponsored by Sen. Debbie Stabenow (D-MI) and Sen. John Boozman (R-AR), to recognize Bitcoin and Ethereum as digital commodities. The bill grants the Commodity Futures Trading Commission (CFTC) jurisdiction over “digital commodities” as defined by the bill, which includes many potential cryptocurrencies outside of BTC and ETH. It also helps clarify the regulatory environment for crypto commodity and spot trading.
Responsible Financial Innovation Act: In June, Sen. Cynthia Lummis (R-WY) and Sen. Kirsten Gillibrand (D-NY) proposed a bill providing a complete regulatory framework for digital assets. The bill would classify cryptocurrencies as commodities, create tax exemptions for transactions up to $200 and block rewards, and require stable coins be backed by a “high-quality liquid asset”.
Two bipartisan bills focused on stable coins and crypto transaction taxes: At the end of July, Sen. Pat Toomey (R-PA) and Sen. Kyrsten Sinema (D-AZ) introduced a bill that would exempt crypto transactions under $50 from capital gains tax. Now delayed until after August, House Financial Services Committee Chairwoman Maxine Waters (D-CA) and Ranking Member Patrick McHenry (R-NC) are negotiating a bill that would establish federal oversight of stable coins. While the details have yet to be worked out, the bill appears to provide the infrastructure for non-banks and traditional banks to become regulated issuers of stable coins.
Other crypto legislation
Based on research by the Value Technology Foundation, these crypto bills can be divided into six different categories. These include taxation, central bank digital currency (CBDC), regulatory treatment of digital assets, supporting blockchain technology, sanctions, and limitations on crypto use by elected officials.
Crypto Taxation
The Infrastructure Investment and Jobs Act (H.R. 3684) became public law in November 2021, to be implemented by January 1, 2023, to provide guidelines for crypto tax reporting requirements. It provided a new definition for digital assets and defined a ‘broker’ as the IRS would consider someone, as “…any person who (for consideration) is responsible for regularly providing any service effectuating transfers of digital assets on behalf of another person.”
Crypto users took issue with this definition, as it failed to distinguish between crypto exchanges, which have the legal means to comply with the IRS, versus miners, stakers, and programmers, would could qualify under the provided definition. According to an article in Forbes, “there have been no less than five bills introduced in an attempt to modify or reverse the impact of the legislation.”
Additional tax legislation has focused on fair taxation laws for crypto users in an uncertain regulatory environment. The Safe Harbor for Taxpayers with Forked Assets Act of 2021 would protect anyone who received income as a forked convertible virtual currency. The Virtual Currency Tax Fairness Act of 2022 was also introduced to exempt personal gains from virtual currency of $200 or less.
Central Bank Digital Currency (CBDC) Bills
The Central Bank Digital Currency Study Act of 2021 (H.R. 2211) is one of the most significant bills introduced since President Biden’s Executive Order on Digital Assets in March. The bill would require the Federal Reserve, Comptroller of Currency, FDIC, Treasury, SEC, and CFTC to study the impact of the introduction of a CBDC. The report would focus on safety, privacy, speed, and price considerations.
The 21st Century Dollar Act (H.R. 3506) was introduced to debate how the U.S. Dollar can remain the world reserve currency, which involved a debate on the idea of a CBDC. The Automatic Boost to Communities Act (H.R. 1030) proposed offering COVID-19 stimulus checks in the form of a ‘digital dollar’ that could be directly deposited into a ‘digital wallet’.
Multiple other bills also studied the ramifications of global CBDC’s implemented by other countries. Sen. Bill Hagerty (R-TN) introduced a bill (S. 2543) to study the national security implications of China creating its own CBDC, known as e-CNY. The Accountability for Cryptocurrency In El Salvador Act (ACES) Act (S. 3666) was also introduced to pass a mandate to the U.S. Department of State to study the effects of making a current cryptocurrency, Bitcoin, legal tender.
Regulatory Clarity on Digital Assets and Securities
The Blockchain Regulatory Certainty Act (H.R. 5045) was introduced by Sen. Tom Emmer (R-MN) to prevent blockchain developers or service providers from being considered money transmitters or financial institutions. The Token Taxonomy Act (H.R. 1628) sought to address challenges faced by the SEC in defining a digital asset versus a digital asset security.
The Securities Clarity Act (H.R. 4451) was also introduced by Emmer to distinguish between an investment asset (digital token) from the security offering it may have been a part of. The bill applied uniformly to all assets, tangible and digital. More recently, the Digital Commodity Exchange Act (H.R. 7614) was introduced by Congressman G.T. Thompson (R-PA), and meant to provide digital commodity trading organizations with federal registration, an alternative to state money transmitter licenses, to help supervise digital asset custodians.
Some other regulatory bills include:
- Clarity for Digital Tokens Act of 2021 (H.R.5496)
- The Digital Asset Market Structure and Investor Protection Act (H.R. 4741)
- The Eliminate Barriers to Innovation Act of 2021 (H.R. 1602)
- U.S. Virtual Currency Consumer Protection Act of 2021 (H.R. 5100)
- The Virtual Currency Market and Regulatory Competitiveness Act of 2021 (H.R. 5101)
- Digital Taxonomy Act (H.R. 3638)
- Consumer Safety Technology Act (H.R. 3723)
Supporting Blockchain Technology
The Blockchain Technology Coordination Act of 2021 (H.R. 3543) established a National Blockchain Coordination Office within the Department of Commerce. The Blockchain Innovation Act (H.R. 3639), introduced by Congressman Darren Soto (D-FL), requires the Department of Commerce to consult with the Federal Trade Commission and other relevant agencies to study the implications of blockchain technology.
The Chips and Sciences Act of 2022 (H.R. 4346) establishes a crypto advisory role inside the presidents administration. The advisor will focus on blockchain and cryptocurrency issues, working out of the Office of Science and Technology Policy. Of course, the new Responsible Financial Innovation Act, which is forthcoming, will be one of the biggest proponents of blockchain technology to pass Congress.
Sanctions, Ransomware, and International Usage
Sponsored by Sen. Elizabeth Warren (D-MA), the Digital Asset Sanctions Compliance Enhancement Ace of 2022 (S.3867) was intended to address the use of cryptocurrency by Russian oligarchs to circumvent U.S. sanctions. The Russian Digital Asset Sanctions Compliance Act of 2022 (H.R. 7429) also had a similar purpose. The Russia Cryptocurrency Transparency Act (H.R. 7338) requires congressional notification if the U.S. State Department issues rewards using cryptocurrency.
Also proposed by Warren was the Ransom Disclosure Act (S.2943), which requires entities to disclose ransom payments to the Department of Homeland Security, but specifically, “must conduct a study to determine if there are commonalities with respect to the information disclosed and the extent to which cryptocurrency has facilitated the kinds of attacks that resulted in such payments.”
The Sanction and Stop Ransomware Act of 2021 (S.2666) addressed ransomware attacked on the U.S. Specifically, the bill “requires the instituting of regulatory requirements for cryptocurrency exchanges operating within the United States to reduce the anonymity of users and accounts suspected of ransomware activity.”
Limitations on Crypto Use by Elected Officials
Introduced in May this year, the Cryptocurrency Accountability Act (H.R. 7862) amends the Ethics in Government Act of 1978 to require members of Congress to disclose financial interests in cryptocurrency.
Very little movement has occurred to regulate how politicians handle investments into cryptocurrency, although more regulation will almost certainly come soon. There are currently over 100 members of U.S. Congress that hold Bitcoin — a non-trivial number.
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