US crypto bill spells big benefit for retail investors: developers
A recently introduced federal US crypto bill spells a big benefit for retail investors, say digital asset developers.
Earlier this month, US Senators Cynthia Lummis of Wyoming, a Republican, and Kirsten Gillibrand of New York, a Democrat, proposed bipartisan legislation that would treat cryptocurrencies such as BTC, ETH and ADA as commodities rather than securities.
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‘Basket of wealth’
The proposed legislation will greatly increase retail investment in cryptos if the bill is passed, despite the sector currently experiencing a series of issues including the collapses of Terra blockchain network and Celcius Network halting withdrawal says Andrew Durgee.
The head of Republic Crypto, the asset management arm of Republic and its Republic Crypto Fund, told Capital.com that proposed legislation would provide security to investors.
“If we modify how we identify a security and we modify how retail [investors] can participate within a security, we unlock an entire basket of wealth and opportunity for only businesses and companies that are trying to get off the ground, but also for retail investors to be able to be a part of that potential growth and that potential upside,” he said.
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“So I think that would change the face of investing fairly dramatically and, whether that’s in crypto or that’s in other verticals, you’re really going to change that landscape.”
The crux of the issue is that by classifying digital assets such as Solana (SOL) or Litecoin (LTC) as commodities, it brings them under the oversight of the US Commodity and Futures Trading Commission.
Such a move would transmute the crypto sector from an unregulated arena to a supervised market.
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Rules date to Depression
Durgee noted that many people need to be accredited investors with highly valued personal investments before they can participate in early-stage cryptocurrency offerings or acquire stock in companies before initial public offerings. Most of the rules stem from the Great Depression of the 1930s, he pointed out.
“We’re talking about running laws and a financial system from nearly 100 years ago,” he said. “And how does that translate to the modern world? It doesn’t.”
Contending that many laws will need to be revised, he called the Lummis-Gallibrand bill a step towards modernizing old laws.
“I think it needs to be done carefully,” he said. “There are certainly pitfalls that we want to try to avoid. But understanding that, the ability to self-educate [about finance] is much different now than it was in the ’30s.”
More institutional investor participation?
Jason Allegrante, chief legal and compliance officer for Fireblocks, a software-as-a-service firm that helps financial institutions develop digital economies and supports numerous cryptos, including the currently embattled TRON Networks's TRX token.
Allegrante said the bill will expand institutional investor participation in the crypto sector and open it up to more retail investors.
“The more institution involvement we can get in this space, the more buyers of these asset classes we’ll have,” he said.
Operational standards could also be changed and give individual investors greater custody of their assets.
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Custody rules could change
“The custody rules that are in place now, at least in the United States, tend to look at the regulated status of the institution holding the assets on behalf of the investors,” he said. “We don’t think that’s a great way going forward, or at least, it’s not the only way going forward.”
The issue is not whether securities or commodities rules apply, he added.
“They both have their, let’s say, advantages and challenges to them,” he said. “Their rule sets are designed to address different risk in very differently structured markets.
“But all of that aside, when you [as a cryptocurrency company] don’t know which rules set to comply with, you have a classification problem, and you have a compliance issue within operating your business.”
Allegrante said the bill recalibrates the relationship between securities and commodities and, if it becomes law, will provide more clarity to the market. By knowing whether bitcoin (BTC), ether (ETH) and other cryptocurrencies are commodities or securities, crypto companies can comply with the law – “which is what everyone wants to do” – and grow the industry and investment.
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Investor protection critical
In Allegrante’s view, the bill also marries the “libertarian thinking” on the Republic side of the House and the “absolutely critical” investor-protection concepts touted by Democrats.
“I think this bill does a lot for retail investors as well as institutional investors, and I think it’s because we’re now bringing in multiple voices from both parties who are coming at this from slightly different angles.”
Ultimately, both sides have “the best interests of American competitiveness at heart.”
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