Cryptocurrency Clarity Through The Responsible Financial Innovation Act

After months of anticipation, a bipartisan bill covering Bitcoin and other cryptocurrencies has finally been introduced. 

It’s called the Responsible Financial Innovation Act.
Spearheaded by U.S. Senators Cynthia Lummis (R-WY) from the Senate Banking Committee and Kirsten Gillibrand (D-NY) from the Senate Agriculture Committee, this legislation seeks to encourage “responsible innovation” in the crypto space.
The bill also seeks to utilize existing laws to provide greater clarity on digital assets, which remain largely unregulated.
The U.S. Securities and Exchange Commission (SEC) and Commodities Futures Trading Commission (CFTC) will be tasked with most of the work.
Digital assets falling under the category of securities will be regulated by the SEC. And those classified as commodities will fall under the CFTC.
The bill utilizes “The Howey Test” to distinguish between ancillary assets and securities. To be a security, the digital asset must provide the owner with a debt or equity interest in a business, liquidation rights, or dividend payments. 
This will effectively classify most cryptocurrencies as commodities rather than securities.

Cryptocurrency as a commodity
Cryptocurrency exchanges will be required to register with the CFTC and abide by all rules, including customer protections and prevention of market manipulation and data-sharing.
With the CFTC overseeing spot markets, I think we will get much closer to an approved Bitcoin spot exchange-traded fund (ETF) in the U.S. The main reason that the SEC is currently against a spot ETF is due to a lack of regulation on spot markets and exchanges being unwilling to work with regulators.
This regulatory compliance of exchanges will also open the flood gates for institutional investment. 
In my recent conversation with Kevin O’Leary, he spoke about sovereign wealth funds and their desire to invest in Bitcoin and other crypto assets. (You can watch the full interview if you’re a member of Crypto Cycle). They are simply waiting for regulation like this. If and when this bill passes, billions of dollars will be invested into cryptocurrency in perpetuity.  
The bill will also provide a tax exemption for capital gains under $200 on Bitcoin payments. This will encourage the use of cryptocurrencies as a medium of exchange.
Also, crypto miners will not have to pay income tax on digital assets until they are converted into fiat money. This will incentivize people to continue mining Bitcoin and other cryptocurrencies without worrying about excessive taxation.
Stablecoins also get a fair amount of attention in this bill. It requires stablecoin issuers to hold U.S. dollars or equivalents that will be redeemable by the customer any time they choose. This is particularly relevant after witnessing the collapse of Terra Luna and the dangers of algorithmic stablecoins. 
All in all, this bill is an extremely important step towards clear policy and regulation of digital assets. 
Many people in the crypto space are critical of government intervention and wish to keep everything free and decentralized. And while I think that’s admirable, I also recognize that in order for this sector to grow, it needs widespread institutional adoption.
That’s not to say there won’t always be the “Wild West” aspects of crypto. I don’t think that’s ever going away. And I have no problem with that.

But by supporting positive legislation in the space, forward-thinking politicians are paving the way for the U.S. to lead the world in the most important technological innovation since the Internet.

Keep coming back,

Chris Curl

Chris Curl
Editor, Daily Profit Cycle