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U.S. Congress has been looking at regulatory measures for cryptocurrencies since the inception of Facebook’s Libra project, and has now created a draft of a proposed bill called ‘Crypto-Currency Act of 2020’.
The bill will be used to categorize Federal agencies and what specific digital assets they regulate in order to make it easier for them to inform the public of Federal licenses, documents, certificates or any other registrations to develop or trade crypto assets.
The bill contains the following elements: it assigns a definition to the ‘Federal Digital Asset Regulator’ and ‘Crypto Regulator’ for the three agencies CTFC, SEC and FinCEN; it divides digital assets into three categories, namely cryptocurrencies, crypto commodities and crypto securities; and opts that the CFTC will regulate crypto commodities, the SEC will regulate crypto securities and FinCEN will regulate cryptocurrencies.
Additionally, each federal crypto regulator has to be available for the public and should have a list of all federal licenses, certificates or other registration documents. The Secretary of Treasury along with FinCEN will have to create a set of rules such as that financial institutions to be able to trace cryptocurrency transactions as dictated by the G20-sponsored FATF guidelines.
Definitions in the Proposed Crypto Bill
The definitions of each term in the bill are thorough to avoid any error in the future. Crypto-Commodity is defined as economic goods or services that has sustainable fungibility and the market has no regard for who produced it, and it rests entirely on a blockchain or a decentralized ledger. Cryptocurrency’s description defines that it is a representation of the US dollar resting on a blockchain or decentralized ledger. It is further divided into types: reserve-backed digital assets (also known as stablecoins), or derivatives that are determined by decentralized oracles and are collateralized by crypto commodities or other cryptocurrencies or securities.
A crypto security is defined as all debt, equity and derivative instruments that rests on a blockchain or decentralized ledger. Exceptions are included in crypto security. It is operated with accordance to the Bank Secrecy Act and other screening requirements and it is registered with the Department of Treasury.
The act also differentiates between reserve-backed stablecoin and synthetic stablecoin. Reserve-backed stablecoin is a representation of currency that is issued by the United States that rests on a blockchain and it is backed on a one-to-one basis; whereas, a synthetic stablecoin means a digital asset with the exception of reserve backed stablecoin that is stabilized against the value of a currency or other asset that rests on blockchain.
The rising popularity of crypto in United States has become a challenge for regulators. With the new bill, the regulatory process of blockchain technology and cryptocurrencies will become much easier.