‘The Cryptocurrency Act 2020’ Bill Introduced in the US about Regularity Clarity of the Crypto Assets

Highlights

• ‘The Cryptocurrency Act 2020’ draft bill has been proposed in the US House of Representatives.
• The bill classifies crypto assets in three categories and subjects them under US federal Jurisdiction.

R  The bill is controversial and could bring turbulence in the entire crypto industry if passed in the house. While presenting the Bill, Paul Kosar expressed that amidst the vague atmosphere about the regulations and the classification of the crypto assets, this bill will configure the crypto industry and will regulate the assets under specific jurisdictions as proposed in the bill. The Bill supposedly will clear the ambiguity and debate about the authority of regulatory bodies upon various categories of crypto assets.

The Outline of the Bill 

1) As per the bill, the following three security agencies will function under the ‘federal Crypto Regulator’ or ‘Federal Digital Asset Regulator’. Commodity Future Trading Commission (CFTC); the Securities and Exchange Commission (SEC);  and the Financial Crimes Enforcement Network (FinCEN).

2) The Bill distinguishes digital assets into three different categories.
a) Cryptocurrencies
b) Crypto communities and
c) Crypto securities

3) The bill signifies that all three Federal Regulators will be accountable to inform the public details of licensing and certification requirements to participate in the U.S. crypto market. The three regulatory bodies will be unified to provide a strong regulatory mechanism for the industry.
4) Each one of the federal Crypto regulators will determine each of the crypto asset categories:
a) FinCEN for cryptocurrencies
b) CFTC for Crypto commodities
c) SEC for Crypto securities

The respective regulators will be accountable to issue licenses, registrations and essential certifications required for trading in digital assets.

5) Classification of Crypto Assets in the Bill

Cryptocurrencies

According to the bill, the cryptocurrencies include :
a) Blockchain representation of the US fiat currency
b) Synthetic derivatives determined by smart contracts
c) Reserve backed digital currency including stable coins

Crypto Securities

It includes all debts, derivative instruments, the equity that integrates blockchain or decentralized ledger.

Crypto Commodities 

Crypto commodities will include economic goods and services with substantial fungibility. These assets must reside on a blockchain or the decentralized crypto ledger.

The Impetus behind the Bill

After Facebook has announced the development of its crypto-asset Libra in June 2019, a huge turmoil has been observed in the global crypto and finance industry. While many countries are seeing it as a threat to their monetary sovereignty, the Libra project has generated panic waves among crypto stakeholders, creating political skepticism and regulatory concerns among the financial authorities. In another development, a group of US legislators has sent a letter to Commissioner of Internal Revenue Service (IRS) recently, seeking clarification on bringing airdrop and crypto forks under crypto taxes.

This is guest post.