On July 12, Sen. Kirsten Gillibrand, D-NY, on the Senate Banking Committee, and Sen. Cynthia Loomis, R-Wyoming, on the Agriculture Committee, joined forces again to propose a sweeping bill. Organizing and implementing the federal government's response to crypto activity in the United States. In a press release announcing the legislation, the two senators acknowledged that they worked with several stakeholders (including Cadwallader) to improve their previous legislation (summer 2022) to achieve "significant response" and described the 2023 bill as widely publicized legislation. "It adds powerful new protections and safeguards to further strengthen the industry against fraud and bad guys, while allowing American inventors to thrive." The Loomis-Gillibrand invoice is 274 pages long and addresses several cryptocurrency issues, including cryptocurrency registration. The exchange is strengthening anti-money laundering provisions related to the tax treatment of cryptocurrency operations and is setting a path for depository institutions to issue payment stablecoins.
More importantly, the main challenge in cryptocurrency legislation to date has been identified when the Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading Commission (“CFTC”) have jurisdiction over crypto activity. , especially Howey coding. The test acknowledges that all crypto assets may or may not be subject to the jurisdiction of the Securities and Exchange Commission (SEC) and/or the CFTC. The updated Loomis-Gillibrand bill greatly improves this, providing a clear definition of the crypto assets each entity (and in some cases both entities) must regulate and exempting token assets and stablecoins from this definition.
As in previous versions of the bill, the CFTC has wide exclusive jurisdiction over the market for “fungible crypto assets” and the ability to register “crypto exchanges” and regulate “decentralized crypto exchanges.” “Cryptoasset” is included in the definition of “Product”; However, some provisions of the revised Commodity Trading Act will only apply to “commodities” that are considered “crypto assets.” Futures brokers fall under the definition of a “crypto asset broker” and are allowed to trade in “crypto assets,” but they must adhere to mandatory separation and custody agreements with third parties and avoid conflicts of interest with affiliates. Many of the amendments to this version of the bill led to the “crypto winter” and were addressed in the CFTC and SEC enforcement actions and complaints related to FTX, Alameda, Binance, and others.
The bill involves a wide range of agencies, including federal banking regulators, state banking regulators, the Office of Foreign Assets Control ("OFAC"), the Financial Crimes Enforcement Network ("FinCEN"), and the Federal Trade Commission ("FTC"). ). ), directing them to take steps to address consumer protection issues, including enacting a uniform money transfer law, regulating cryptocurrency market participants nationwide, educating consumers about the cryptocurrency market, and establishing advertising standards. Marketing crypto products and services.
Finally, for the purposes of this brief note on the bill, the overview gives a section of the SEC what it says “resolves long-standing issues with SEC oversight requirements” when holding a crypto asset. Oversight, the SEC's requirement to maintain a good supervisory position "can be met by protecting the [encrypted] private key asset with commercially reasonable computer security measures."
Given the sweeping nature of the bill, this summary only covers some of the bill's highlights, but we'll provide more in-depth analysis as the legislative process progresses.