Here Is Everything In The U.S. Senate Bitcoin And Crypto Bill

Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) released their highly anticipated cryptocurrency bill last week.

We read the 70-page bill so you don't have to. Here's what you need to know: 

Although the bill is unlikely to be brought up for a vote due to the current political environment, let alone pass, portions of this bill are almost certain to be included in larger pieces of legislation going forward.

It's a positive sign the bill is sponsored by two Senators on opposite sides of the aisle. Neither political party wants to be seen as anti-crypto. That's a sure sign cryptocurrencies are here to stay.

The main purpose of the bill is to provide a framework for determining whether a cryptocurrency will be classified as a security or a commodity, and thus regulated by the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC).

This is important because commodities have a relatively small regulatory burden, but securities have regular reporting requirements that would be a death sentence for most crypto projects.

The other goals of the bill are threefold:

  1. Keep innovation here in America: If these technologies are classified as securities then there will be greater oversight and these projects will be forced to report their finances to the SEC.

    As stated above, this would all but kill the vast majority of crypto projects. The crypto projects that remain would migrate to countries outside the jurisdiction of the US. So this bill is trying to avoid this and maintain American leadership in the direction of this burgeoning industry.

  2. Provide regulatory clarity to financial institutions: The lack of clarity is preventing major banks and investment funds from investing in crypto markets because they’re scared of being hit with regulatory enforcement at a later date.

    There is a lot of money waiting on the sidelines that could enter crypto markets very quickly once these regulatory questions are resolved.

  3. Provide tax protection to consumers: This bill eliminates capital gains taxes on cryptocurrency transactions totaling less than $200. (It is unclear if this rule applies per transaction or for all transactions over a period of time.) One of the promises of cryptocurrency is being able to spend it like regular currency, such as buying coffee with Bitcoin.

    However, under current rules, any exchange of crypto back into dollars or even into another token triggers a capital gains event. Imagine buying coffee with Bitcoin and being taxed 40% on your spending as capital gains! That's the current law!

So is this a good bill?

It's definitely a step in the right direction. Until now, the text of the bill was kept under lock and key by the Senators' offices. Now, these policies and regulations will be openly discussed by Congress, regulators, lobbyists, and crypto industry insiders.

As we said, it's very likely that some parts of this legislation will ultimately become law as piecemeal add-ons snuck into larger legislation.