The United States is a global economic behemoth with a GDP of almost $21 billion. Its financial industry does business worth a whopping $4.8+ trillion per year. Thus, quite naturally, the United States is at the top of the ladder in terms of the crypto market, too. The only thing that was missing so far was serious efforts by US authorities to regulate in the virtual assets industry in a progressive way.
Finally, US Senators Kirsten Gillibrand and Cynthia Lummis introduced a regulatory framework for cryptocurrencies and announced it through a press release on June 7, 2022. Drawing a parallel with Senator Gillibrand’s home state, Wyoming’s crypto-friendly practices that contributed significantly to the state’s standing in the global and the national crypto industry, the press release noted that the “Responsible Financial Innovation Act,” also known as Lummis-Gillibrand, will bring similar success at the federal level.
So, without further ado, let’s look at what the “Responsible Financial Innovation Act” has in store for the crypto industry.
The Act will make it easier to distinguish between digital assets, meaning which is a security and which one is a commodity. It will further shine a light on the regulatory obligations of virtual asset companies and empower regulators by giving them more clarity on their role and how they should enforce the current regulations. Besides, the bill will have an all-around definition of digital assets, which, so far, has been non-existent.
The Securities and Exchange Commission is the de-facto authority over the crypto assets so far in the United States. That will change if the “Responsible Financial Innovation Act” comes into force. The bill states that most digital assets are more like commodities than securities. Thus, instead of the SEC, CFTC will be the regulatory authority of digital assets.
Stablecoins play a critical role in the virtual assets space. Thus, it is crucial to ensure that stablecoins are backed by 100% reserve, whichever may be the asset behind them (USD, Gold, Silver, Bitcoin). Thus, the Act mandates that the stablecoin issuer must hold 100% reserve equal to the value of stablecoins issued, and they must also comply with detailed disclosure requirements.
The world of virtual assets is a fast-evolving one. Thus, the Lummis-Gillibrand Act calls for forming an advisory committee to advise lawmakers on this new technology and empower regulators.
The Act underscores the need for consumer education in the Virtual asset space. Thus, it makes disclosure mandatory for crypto companies to ensure that consumers make an informed decision.
Considering that the environmentalists call crypto mining a highly energy-intensive practice contributing to global warming, the bill demands a report on energy consumption by the crypto industry from Federal Energy Regulatory Commission.
The bill also directs Government Accountability Office (GAO) to prepare a report on the pros and cons of adding digital assets to retirement savings. After all, digital assets have become a popular addition to retirement savings funds such as 401(K).
The bill notes that the new-age innovative technologies need support in the early stages. Thus, the Act will create a collaborative framework bringing both state and federal regulators together, where they will study the products and their underlying technology. As such, it will enable regulators to get a first-hand experience of the innovative digital asset-related products, helping them develop a better understanding of the technology.
The bill directs the Office of Management and Budget, the Cybersecurity and Infrastructure Security Agency, the Director of National Intelligence, and the Defense Department to conduct a study on Digital Yuan, China’s CBDC. The reason is that China has become the first country to launch a CBDC, and it is now pushing for its use on the international stage, which can become a national security complication for the United States.
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With more & more countries regulating digital assets, crypto exchanges must start complying with the current law of the land from today itself, if they haven’t already been doing so. It will help them stay clear of any present & even future violations. Start with the FATF’s Travel Rule, as it is the most crucial piece of global regulation around digital assets today and is likely to shape the future of virtual asset transactions worldwide. As of now, only a couple of countries have adopted the Travel Rule. But, sooner or later, all FATF member countries will adopt it.
Complying with the Travel Rule is easy. All you need is an excellent Travel Rule Service Provider (TRSP), and Veriscope is the absolute best. Plus, it is also the only solution to the “Sun-rise Issue” that Virtual Asset Service Providers face while complying with the Travel Rule. So, go ahead, and contact our BizDev team to know all about Veriscope.
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