Last Tuesday, Representative Paul Gosar (R) from Arizona’s 4th district introduced proposed federal legislation designed to regulate Bitcoin and the rest of the cryptosphere. This is the first federal legislation of its type ever.
Its two major aspects are that it assigns different government agencies to regulate different types of crypto assets and that it outlines the rules of the game for financial institutions that deal in crypto assets. It’s known as the Cryptocurrency Act of 2020.
The first type of crypto asset specified is what is called a ‘crypto-commodity.’ The authors of the bill define a crypto-commodity as a crypto asset that is largely or entirely generic in nature and mostly or entirely interchangeable with slightly different versions of the same asset; much like the agricultural products and precious metals that are traded today in established financial markets.
Apparently Bitcoin would be classified as a crypto-commodity.
The proposed legislation stipulates that the Commodity Futures Trading Commission regulates crypto-commodities.
The second type of crypto asset mentioned is crypto-currencies. The authors of the proposed legislation define a crypto-currency as a crypto asset representative of a national currency such as the US Dollar.
This is the category for currency-backed stablecoins as well as for any other type of crypto asset that the authors call a ‘synthetic derivative.’ A synthetic derivative, in this case, is a crypto asset backed by another asset. A good example of a synthetic derivative from the stock market would be any exchange traded fund (ETF).
The proposed legislation stipulates that the Secretary of the Treasury acting through the Financial Crimes Enforcement Network regulates crypto-currencies.
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The third category noted here is that of ‘crypto-securities.’ The authors define crypto-securities as, “all debt, equity, and derivative instruments that rest on a blockchain or decentralized cryptographic ledger.”
The proposed legislation mandates that the Securities and Exchange Commission regulates crypto-securities.
The fourth and final proposed category of crypto asset is that of a decentralized oracle. Ethereum would be categorized as a decentralized oracle, XRP probably would be too. This category would apply to a crypto asset that acts as a catalyst for the execution of smart contracts resting on a blockchain.
There is no regulator suggested for decentralized oracle crypto assets. This could be very bullish for cryptos in this category.
The proposed bill also mandates that each regulatory agency designated to oversee the market provides the public with information regarding exactly how individual crypto investors as well as crypto dealers are to conduct all their crypto transactions. This is how regulatory clarity can be established.
Lastly, the pending legislation stipulates that the Secretary of the Treasury acting through the Financial Crimes Enforcement Network will issue rules to require each crypto-currency to allow for the tracing of transactions and the people making the transactions in a manner consistent with already existing law regarding the tracing of conventional financial market transactions.
Tell us what you think about this legislation in the comment section below. What do you think are the pros and cons of stricter oversight and regulation of the cryptocurrency space? Will it mean a bull run for crypto prices? Will it bring more stability or even greater manipulation of the market as institutional investors arrive? Does government compliance create unnecessary barriers to entry for entrepreneurs? What does it mean for taxation? Can decentralization be maintained with government involvement? Give us your thoughts.
Also See: The Banking Digital Arms Race
Peter A. Kirby is a San Rafael, CA researcher, author, and activist. Please join his email list at his website peterakirby.com or buy his book Chemtrails Exposed: A New Manhattan Project available now exclusively at Amazon.
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