US to Regulate Cryptocurrencies.

Congress has proposed a new regulation draft bill in the 116th CONGRESS 1st SESSION.

“Crypto-Currency Act of 2020" (Draft Bill)

The Draft Bill Divides the Cryptocurrencies into Different categories.

1. Cryptocurrencies.
2. Crypto Commodities.
3. Crypto Securities.
4. Decentralized Oracle.
5. Digital Assets.
6. Federal Digital Assets Regulator.
7. Reserve Backed Stablecoin.
8. Synthetic Stablecoin.

Cryptocurrencies.

In the proposed draft bill the term Cryptocurrencies is defined as the “Representations of United States currency or synthetic derivatives resting on a blockchain or decentralized cryptographic ledger.”

This definition will be used to classify stablecoins and digital currency.

Crypto Commodities.

“Economic goods or services that a) has full or substantial fungibility, b) the markets treat with no regard for who produced the goods or services, and c) rests on a blockchain or decentralized cryptographic ledger.”

This is for cryptos.

Crypto Securities.

“All debt, equity, and derivative instruments that rest on a blockchain or decentralized cryptographic ledger.”

It specifically notes the KYC/AML requirements in addition to other standards that must be met for issuance.

With a security token definition, many firms will see roadblocks for licenses cleared, expedited approval processes for broker-dealers, faster Reg A+ approvals, and a quicker turnaround for exchanges and ATS.

Decentralized Oracle.

The term ‘‘Decentralized oracle’’ means a service that sends and verifies real-world data from external sources outside of a blockchain and submits such information to smart contracts that rest on the blockchain, thus triggering the execution of predefined functions of the smart contract.

Digital Assets.

The term ‘‘digital asset’’ means a crypto-commodity, crypto-currency, or crypto-security.

Federal Digital Assets Regulator.

The term ‘‘Federal crypto regulator’’ means

• The Commodity Futures Trading Commission, with respect to crypto-commodities.
• The Secretary of the Treasury, acting through the Financial Crimes Enforcement Network, with respect to crypto-currencies.
• the Securities and Exchange Commission, with respect to crypto securities.

Reserve Backed Stablecoin.

The term ‘‘reserve-backed stablecoin’’ means a digital asset that,

• Is a representation of currency issued by the United States or a foreign government.
• Rests on a blockchain or decentralized cryptographic ledger.
• Is fully backed by such currency on a one-to-one basis and fully collateralized in a correspondent banking account.

Synthetic Stablecoin.

The term ‘‘synthetic stablecoin’’ means a digital asset, other than a reserve-backed stablecoin, that

• is stabilized against the value of a currency or other asset.
• rests on a blockchain or decentralized 7 cryptographic ledger.

A federal crypto regulator is assigned for each category and is defined as the sole Government agency with the authority to regulate:

• The CryptoCurrencies will be regulated by the FinCEN.
• The Crypto Commodities will be regulated by the CFTC.
• The Crypto Securities will be regulated by the SEC.