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US English

US crypto commodity bill a ‘milestone’ for the sector

By Monte Stewart


Updated

US Capitol Building
Two US senators have introduced a bipartisan bill that would create a federal cryptocurrency regulatory framework.

A proposed US law that would treat cryptocurrency as a commodity marks a milestone in digital asset development, says the president of the American Blockchain and Cryptocurrency Association (ABCA).

Two senators, Republican Cynthia Lummis of Wyoming and Democrat Kirsten Gillibrand of New York, introduced a bipartisan bill, the Responsible Financial Innovation Act, on Tuesday which calls for federal oversight of crypto assets such as BTC and ETH.

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Catching up with friendlier nations

“Quite honestly, it sets the stage for crypto companies to feel more confident about setting up shop in the US,” ABCA president Howard Greenberg told Capital.com.

Based in Washington, DC, the ABCA serves as a non-profit trade association for the blockchain and crypto sector, emphasizing advocacy and education while representing bitcoin miners and digital asset investors, innovators and entrepreneurs.

Many blockchain and digital asset developers have opted to locate in other jurisdictions, such as Singapore and Dubai, that are viewed as more crypto-friendly.

Crypto investor protection concerns

The bill calls for major cryptocurrencies to be regulated as commodities rather than securities. US Securities and Exchange Commission (SEC) chief Gary Gensler has drawn the wrath of crypto developers by stressing the need for digital coins and NFTs to be treated as securities.

Gensler has contended that digital assets do not have the necessary investor protections in place.

Howard GreenbergHoward Greenberg, ABCA President (Photo: ABCA)

‘Positive step forward’

The proposed law would make “a clear distinction between digital assets that are commodities or securities,” says a summary of the legislation contained in a news release issued by the two senators.

And if passed, the law would grant “digital asset companies the ability to determine what their regulatory obligations will be.”

Regulation of the US crypto markets would be split between The Commodity Futures Trading Commission (CFTC) and the SEC.

“This is the rails that we’ve been looking for,” said Greenberg, referring to regulatory guidelines.

The recent collapse of the original LUNA coin and the depegging of related stablecoin TerraUSD, brought to light systemic risk that can occur if digital assets are not regulated, he added. LUNA has since been replaced by LUNA2.

SOL/USD

182.71 Price
-8.930% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 22:00 (UTC)
Spread 2.2652

XRP/USD

0.59 Price
-3.260% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 22:00 (UTC)
Spread 0.01168

ETH/USD

3,347.28 Price
-4.770% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 22:00 (UTC)
Spread 6.00

BTC/USD

63,975.80 Price
-4.780% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 22:00 (UTC)
Spread 106.00
Cynthia LummisSenator Cynthia Lummis (Photo: Getty Images)

‘Most comprehensive’

“This is definitely the most comprehensive and well thought out [cryptocurrency-related] bill so far,” said Greenberg.

The SEC would also have the authority, twice per year, to review commodity cryptocurrencies that are not fully decentralized.

“The United States is the global financial leader, and to ensure the next generation of Americans enjoys greater opportunity, it is critical to integrate digital assets into existing law and to harness the efficiency and transparency of this asset class,” Lummis, said in the news release

 

‘Protects consumers’

In the news release, Gillibrand said the proposed law will establish a regulatory framework that “spurs innovation, develops clear standards, defines appropriate jurisdictional boundaries and protects consumers.”

But the bill must travel a long road before the intended law can become reality. 

Ether (ETH) to USD

‘First step’

“It’s going to take a while,” said Greenberg. “This is the first step. Nothing in DC [the US capital] goes through quickly, in general. It’s definitely going to be complicated.”

It remains to be seen whether the current US Congress can decide the bill’s fate before the current congressional term expires.

Will bill pass?

Owen Tedford, a senior research analyst at Beacon Policy Advisors, called the bill “an important step in the process toward comprehensive cryptocurrency legislation,” but in a recent note to clients said its passage this year still faced long odds, MarketWatch reported.

“The bill is very likely to resurface even if control of the senate changes,” Tedford wrote, according to MarketWatch.

“It is best to see this as one step on a winding road, but these discussions now will influence the shape of any future bill.”

Markets in this article

BTC/USD
Bitcoin / USD
63975.80 USD
-3221.55 -4.780%
ETH/USD
Ethereum / USD
3347.28 USD
-167.45 -4.770%
LUNA2/USD
LUNA2.0 to USD
0.8183 USD
-0.1204 -12.990%

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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