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U.S. Senate Eyes Cryptocurrency Bill. Here’s What That Means for Investors.

June 10, 2022

The 2022 cryptocurrency market is a mixed bag — and depending on your perspective (or more likely, the size of your investments), the news hasn’t been positive through the first six months of the year.

That may change soon. The Responsible Financial Innovation Act, a bipartisan bill introduced in the U.S. senate, would answer a number of key questions about cryptocurrencies, non-fungible tokens (NFTs), and other digital assets, potentially improving the entire crypto marketplace in the process. 

“The bipartisan Responsible Financial Innovation Act is a landmark bill that will establish a regulatory framework that spurs innovation, develops clear standards, defines appropriate jurisdictional boundaries and protects consumers,” said Senator Kirsten Gillibrand, a Democrat who co-sponsored the landmark bill with Republican Cynthia Lummis. 

“Importantly, the Lummis-Gillibrand framework will provide clarity to both industry and regulators, while also maintaining the flexibility to account for the ongoing evolution of the digital assets market.”

How 2022 Cryptocurrency Regulation (Might) Work

Of course, the word “regulation” isn’t popular among cryptocurrency enthusiasts, but for years, the U.S. government has looked for ways to reign in the market’s wildest impulses without limiting innovation. Currently, cryptocurrencies are taxed as pure assets, which can mean high tax bills for investors when those digital assets fluctuate in value — and with Bitcoin’s value reaching an all-time high of $64,000 in early 2021, early adopters were forced to pay heavily for their savvy investments.

But just as values can skyrocket overnight, they can drop just as quickly. At the time this article was written, Bitcoin was valued at just under $30,000, with Ether sitting at $1,780 — far off its peak of $4,891. 

The Responsible Financial Innovation Act would exempt consumers from reporting small purchases of up to $200. It would also classify digital assets as securities or commodities, depending on their characteristics. Coins like bitcoin and ether would be commodities, and as such, they would be able to be regulated by the Commodity Futures Trading Commission. 

What would that mean for cryptocurrency fanatics? For starters, simpler tax filings, particularly for active traders — and potentially, much lower tax bills.

The Responsible Financial Innovation Act Could Cripple Some Digital Assets

Overall, the bill is good news for investors, many of whom feared a tougher legislative approach to blockchain-related tech. However, in its current form, the law would eliminate algorithmic stable coins, provided that those coins aren’t backed by traditional finance (TradFi) assets (such as the U.S. dollar or the value of precious metals). 

If included in the final bill, this provision would ensure that consumers can always receive a flat payment for stable coin investments. However, it would destroy some stable coins in the process.

Will the Responsible Financial Innovation Act Pass?

The bill was introduced in the Senate, and it’s going to go through numerous committees before it receives a vote (if it receives a vote). After passing the Senate, it would need to pass in the House, and the midterm elections could throw a wrench into the legislative process.

Ultimately, the act may change dramatically before its passage. With that said, most cryptocurrency experts believe that legislation will eventually re-shape the market. If the Responsible Financial Innovation Act is any indication, those changes may be largely positive.

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