August has been a busy month for crypto policy in Congress. Several key bills, many of which aim to regulate the growing field of cryptocurrency, have successfully moved past the committee stage and are now ripe for a floor vote. These proposed legislative moves signal a heightened governmental interest in digital currencies and their broader societal impacts.
Prominently, the Financial Innovation and Technology for the 21st Century Act has made substantial strides. After passing through both the Financial Services and Agriculture committees, this bipartisan bill is setting the stage for a more digitally savvy America. Earlier drafts of the bill were less clear on whether publishing code could instigate regulation. However, after considerable debate and revision, the Act now stipulates an unmistakable exemption, which effectively distances software developers from regulatory oversight.
A concurrent piece of legislation, the Clarity for Payment Stablecoins Act, has garnered attention for its guidance on stablecoin regulation. The Act suggests that stablecoins, digital currencies tethered to a reserve of traditional fiat currencies, should not be subject to regulation if they consist purely of software. This perspective aligns with the view of many crypto enthusiasts who argue that digital currencies fundamentally differ from traditional monetary instruments and thus, require a distinct regulatory approach.
Arguably less noticeable but no less impactful, the Blockchain Regulatory Certainty Act is slated to fortify legal protections for software developers and other non-custodial blockchain services, including miners and multisig providers. This proposed law would introduce a safe harbor, exempting these service providers from state money transmission licensing and FinCEN registration. The bill was first proposed by the Coin Center in 2016, and since then, Representatives Emmer and Soto have diligently advocated for its approval.
However, not all developments in the crypto regulatory landscape have been favorable for the industry. Recently, a lawsuit brought by the Coin Center against the Treasury and the IRS suffered a significant setback. The case challenged an amendment to Section 6050I of the tax code which relates to cryptocurrency. However, the judge dismissed the case largely on the basis of its “lack of ripeness,” suggesting that the claim may have been made prematurely as the law is not due to take effect until January 1, 2024. In response, the Coin Center immediately signaled its intention to appeal to the Sixth Circuit Court of Appeals.
This potentially portends a reality where businesses accepting cryptocurrency payments of $10,000 or more will be required to report not only the transaction but also the Personally Identifiable Information (PII) of the sender, to the government – all without a warrant.
In another critical development, Senators Reed, Rounds, Warner, and Romney introduced the Crypto-Asset National Security Enhancement (CANSEE) Act. Though the senators’ intent to combat potential misuse of crypto protocols by criminal and hostile entities is understandable, critics argue the bill could hamper the development of such protocols in the U.S. Moreover, the act is seen as a direct affront to the First Amendment, thus raising Constitutional concerns.
Overall, this flurry of legislative action signifies a tumultuous and transformative time for cryptocurrency. As lawmakers continue to grapple with the complexities of this innovative technology, the crypto community watches closely as regulations continue to unfold, eager to understand the implications for their operations, investments, and future innovations.
