For months, the U.S. crypto industry has speculated on what form increased regulation might take. This week, we got some answers in the form of a new crypto bill that’s been put before the House of Representatives.
The Digital Asset Market Structure and Investor Protection Act of 2021, introduced by Representative Don Beyer, sets out a framework designed to clear up a lot of the existing grey areas in crypto legislation.
The industry has come under intense scrutiny recently. Elizabeth Warren asked whether the SEC has enough authority to control crypto exchanges, and Federal Reserve Chair Jerome Powell has said more regulation was needed.
As a result, the measured — and at times positive — tone of the new bill is almost refreshing.
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What’s covered by Beyer’s crypto bill
Introducing the bill, Beyer said that, “Digital assets and blockchain technology hold great promise, and it is clear that assets like Bitcoin and Ether are here to stay.”
However, he labeled current laws as “behind the times” and argues that a comprehensive framework for digital assets would protect investors, promote innovation, and create jobs. Beyer said that many of the 20-46 million Americans who own Bitcoin are “average Americans” rather than large institutional investors. And he argued that too many had fallen victim to fraud and hacks.
Here are some of the bill’s proposals and why they matter:
Define which government department is in charge of what assets
One challenge for crypto regulators is that it comes under the remit of several different authorities. That makes it easy for bad actors to fall between the cracks. Cryptocurrencies function in different ways. Some are straightforward currencies, some are programmable blockchains, and some are more like traditional securities. The bill would categorize the different types of digital assets and define which department would regulate them.
Clear up confusion on what is considered a cryptocurrency exchange
The bill also wants to differentiate between money service businesses (MSBs) and securities or commodities exchanges. Right now, U.S. cryptocurrency exchanges have to register as MSBs, but some may be better defined as securities exchanges — and would have to follow stricter regulations.
Formalize digital assets as “monetary instruments”
This would mean cryptocurrencies would be subject to existing anti-money laundering (AML) and reporting requirements. It isn’t yet clear how this would impact anonymous decentralized exchanges as…