The Crypto-Currency Act of 2020
A new bill in Congress may add significant clarity to the Federal regulation of cryptocurrency and other crypto-assets. This new bill, which was introduced by Arizona Congressman Paul Gosar, is called The Crypto-Currency Act of 2020. We’ve talked about the regulatory issues and challenges surrounding bitcoin and other cryptocurrencies previously on our blog. For instance, we’ve spent a good deal of time discussing the regulation of so-called “initial coin offerings,” or ICOs. These offerings are essentially the crypto equivalent of stock market initial public offerings and call for an analogy to securities regulations. Because of their novelty, these ICOs have presented a range of new challenges for federal regulation. Congress can make significant progress toward the federal regulation of crypto-assets with the adoption of this new bill.
In this post, we will go over the central contributions to the federal regulation of crypto-assets contained in the new Crypto-Currency Act of 2020. As we will see, the primary contributions of this new bill are formal definitions for three categories of crypto-assets; additionally, it assigns specific regulatory bodies for each of these separate categories. We’ll now go over the central contributions in detail.
Definitions for Three Types of Cryptocurrency
The Crypto-Currency Act of 2020 provides standard definitions for three separate categories of crypto-assets: crypto-commodities, crypto-currencies and crypto-securities. The bill defines a crypto-commodity as an economic good or service which is fully or substantially fungible. And, the market treats crypto-commodities without regard to whichever entity products the commodity. Crypto-currencies are representations of U.S. currency or synthetic derivatives which rest on a blockchain or decentralized cryptographic ledger. Finally, crypto-securities are debt, equity or derivative instruments which rest on a blockchain or decentralized cryptographic ledger. The bill also provides definitions for other key pieces of terminology which are necessary to fully shed light on the these three categories of crypto-assets. Such terms include decentralized oracle, reserved-backed stablecoin, and others.
Creation of Federal Crypto Regulators
As mentioned, the bill makes three federal agencies responsible to regulate each of these three separate crypto-assets. The agency regulating crypto-commodities will be the Commodity Futures Trading Commission (CFTC). Meanwhile, the agency regulating crypto-securities would be the Securities and Exchange Commission (SEC). The agency which would regulate crypto-currencies would be the Financial Crimes Enforcement Network (FinCEN). Each of these assignments is intuitive. Under the bill, these three agencies are referred to as official “Federal Crypto Regulators.”
Back in October, 2019, all three of these agencies – the SEC, CFTC and FinCEN – collaborated on a statement pertaining to the regulation of digital assets. This statement essentially reiterates the substance of the Crypto-Currency Act of 2020, but it also adds some nuance regarding how these agencies will co-exist with respect to crypto-asset regulation.
Rules for Tracing Crypto Transactions
One of the main goals of the bill is to create rules for tracing cryptocurrency transactions, as well as the persons engaging in the transactions. The institutions which will be in charge of these important goals are the Secretary of the Treasury and FinCEN. This tracking system would be analogous to the way in which financial institutions currently trace traditional currency transactions. This would help to create a much safer environment with respect to crypto-assets, it could also possibly curtail some of the illegal ends which crypto-assets are used to fund.
The Federal Rules Are Evolving
The Federal government continues to grow, even as it expands its understanding of the cryptocurrency world. This new bill in Congress is a consequence of this increased understanding. As the Federal government continues to increase its regulation of cryptocurrency, it will also be interesting to see how the cryptocurrency market changes. It’s also possible that these increased regulations will build consumer confidence, and that may in turn, result in higher values for various digital tokens on the market.
Contact MC&C to Learn More
At Mackay, Caswell & Callahan, P.C., we’ve made a serious effort to stay on top of current developments in the tax and financial universe. Recently, this has involved keeping up-to-date with what’s going on with cryptocurrency. MC&C does this because, by doing so, we can bring the best possible counsel to our clients. We regularly handle federal tax debt resolution, NY State tax debt resolution, sales tax debt, crypto tax debt, and other types of cases as well. Get in touch with one of our top New York City tax attorneys today for additional information or to submit your case.
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