The Digital Asset Market Structure and Investor Protection Act (Crypto Bill) proposes comprehensive reforms to digital assets in the United States. It represents a significant departure from the already progressive approach to digital asset regulation. One important aspect of the new Bill is its strong stance on Stablecoins, which are digital assets backed by a fiat currency like the US Dollar or AUD. The Bill would give the US Treasury Department the authority to oversee the development of stablecoins and the power to reject coins that do not meet their requirements, potentially resulting in the effective banning of many stablecoins.
Furthermore, the Bill would enable the Federal Reserve to create a US central bank digital currency (CBDC). The idea of a CBDC has been under consideration in the US for some time. However, the legislation authorizing the creation of a US CBDC and granting veto power over any other US CBDCs could indicate that the United States is aiming to establish itself as the sole issuer of a US CBDC.
Companies seeking to issue a stablecoin in the United States or those that already operate an existing stablecoin will now be required to seek approval from the Treasury Department. The Treasury must consult with the Securities and Exchange Commission (SEC), the Federal Reserve, the Commodity Future Trading Commission (CFTC), and foreign entities before granting approval. This requirement should be taken into account by companies developing stablecoins denominated in US dollars.
The Bill also aims to enhance regulatory clarity by defining digital asset terminology and specifying the regulatory jurisdiction of either the SEC or the CFTC based on specific digital asset attributes. If passed, the Bill will introduce a definition of “digital asset securities” falling under the SEC’s jurisdiction. Tokens that grant holders equity, dividend payments, profits, interest, or voting rights, as well as permits issued through Initial Coin Offerings, will fall under this definition and, therefore, be subject to SEC oversight. Cryptocurrencies outside the SEC’s jurisdiction would be regulated by the CFTC.
The Financial Crimes Enforcement Network (FinCEN) will be responsible for issuing regulations governing money laundering, anonymizing services, and transactions involving anonymity-enhanced convertible currencies. Lastly, the Bill addresses privacy concerns related to Decentralized Finance (DeFi) by requiring various US agencies to submit recommendations to Congress regarding anonymity. Although the Bill does not directly regulate DeFi, it imposes obligations on the SEC, CFTC, Federal Reserve, and Treasury to consider potential regulatory guidelines and provide recommendations.
Any digital asset operators in the United States should take this Bill into consideration. The extensive changes, including some retroactive measures, could have an impact on existing practices and the regulation of ongoing projects.