Recently, the U.S. Congress is voting on a number of cryptocurrency-related bills, which can greatly improve the clarity of industry regulation. If the relevant bills are successfully passed, they may become a milestone in the regulation of the digital asset industry. The crypto market may be experiencing the most important legislative period in the history of the U.S. Congress. This article will sort out the key contents, market impact and potential passage of the following bills.
H.R.4763 — Financial Innovation and Technology for the 21st Century Act
21st Century Financial Innovation and Technology Act
H.R.4766 — Clarity for Payment Stablecoins Act of 2023
Payment Stablecoin Clarity Act
H.R.4841 — Keep Your Coins Act of 2023
Save Token Act
H.R.1747 — Blockchain Regulatory Certainty Act
Blockchain Regulatory Certainty Act
S.2355 — A bill to clarify the applicability of sanctions and antimoney laundering compliance obligations to United States persons in the decentralized finance technology sector and virtual currency kiosk operators, and for other purposes.（THE CRYPTO-ASSET NATIONAL SECURITY ENHANCEMENT AND ENFORCEMENT (CANSEE) ACT）
Crypto-Asset National Security Enhancement Act
H.R.2670 — National Defense Authorization Act for Fiscal Year 2024
National Defense Authorization Act
Note: “H.R.” stands for House of Representatives, meaning that the bill was proposed by members of the House of Representatives; “S” stands for Senate, meaning that the bill was proposed by members of the Senate.
1. US legislative process
First of all, you need to have a general understanding of the legislative process in the United States to better understand the contradictions and potential opportunities for the passage of bills. The United States is a country with a separation of powers, in which the legislative power belongs to Congress; the executive power belongs to the President of the United States; and the judicial power belongs to the Supreme Court of the United States. Congress is composed of directly elected senators and members of the House of Representatives, each of whom represents the voters in his or her constituency. The specific composition of the seats in the 118th Congress of the United States is as follows:
Senate: 48 Democrats; 3 independents (joining the Democratic Caucus); 49 Republicans
House of Representatives: 212 Democrats; 222 Republicans.
Therefore, the ruling Democratic Party maintains a majority in the Senate, while the Republican Party holds the majority in the House of Representatives.
According to the rules of procedure of the U.S. House of Representatives and Senate, there are four types of bills, namely, simple resolutions, concurrent resolutions, joint resolutions, and bills. Among them, bills are the most common and most used form of legislation. Except for tax bills and omnibus bills, which must be introduced by the House of Representatives, bills are introduced by one house, and after being reviewed and passed, they are sent to the other house for review and approval. After being passed by both houses and the text is unified, they are submitted to the President for signature to become national laws. During this period, the following procedures need to be followed:
1. Drafting a bill
The idea for a bill can come from an industry representative organization or an individual citizen. Only senators or representatives can formally propose legislation. The drafter will look for co-sponsors among his or her fellow members to increase the weight of the proposal.
2. Proposing a bill
During the regular session of Congress, after the proposing member fills in the main content of the bill title in a fixed format and signs it, the House of Representatives puts the bill into the "bill box", completing the bill submission procedure; the Senator will hand the bill in person to the Senate clerk, or at the plenary session, with the permission of the meeting host, read out the bill title and state the bill content, and then complete the bill submission procedure.
3. Committee deliberation
The House will refer the bill to a special committee for research, debate, hearing and improvement. Once the bill is submitted to the committee, it will enter a complex, lengthy and ever-changing review process. The committee review process is a process in which various forces reach a consensus on the basis of competition and compromise. After the committee votes to pass the bill, it will be sent to the full House for debate and voting.
4. Review by the General Assembly
The two houses have significant differences in their plenary deliberation procedures. The House of Representatives emphasizes "the minority obeys the majority" while the Senate emphasizes "consultation, compromise, and cooperation" between the majority and minority parties.
House of Representatives: For important bills that reflect the interests of the majority party, the Rules Committee may adopt "Closed Rules", which means that the bill will not accept amendments or alternatives during the deliberation process; for other bills, the Rules Committee may adopt "Open Rules", which allow members to propose relevant amendments or alternatives during the deliberation process.
Senate: Whether a bill can enter the voting process after being passed by the committee depends on whether it has the support of 60 senators. The Senate has few restrictions on debates among members. As long as they do not violate the rules of procedure, senators can speak freely on any topic without time limit. The Senate can only vote after all members have finished speaking, which has led to a special way of operation - filibuster. Senators can use filibusters to prevent the Senate from voting on bills under consideration. Senators can propose amendments or alternatives of any form and content to any part of the bill, providing space and conditions for the leaders of the two parties to bargain and seek compromise on the bill.
5. Unified text of the two houses
Before the bill is submitted to the President for signature, the two houses must negotiate and unify the text of the bill.
6. Presidential signature
The President signs: approving the bill, and it becomes law.
Presidential veto: Return the bill to Congress and state the reason for the veto. The two houses can accept the president's opinion and revise the bill or joint resolution before sending it to the president for signature. Alternatively, the veto can be overturned by a 2/3 vote in the House of Representatives and the Senate, and the bill will become law.
If the president does not act: If Congress is in session, the bill automatically becomes law 10 days after the president does not respond; if Congress adjourns within 10 days of submitting the bill to the president, the bill will not become law.
Recent digital currency-related bills
1. The Financial Innovation and Technology for the 21st Century Act (Fit21)
sponsor
The 212-page bill was co-authored by Republican members of the House Agriculture and Financial Services Committees and was first released in early June. Its co-sponsors include House Agriculture Committee Chairman Glenn Thompson (R-Pa.), Rep. French Hill (R-Ark.), and Rep. Dusty Johnson (R-S.D.), with Hill leading the inaugural Digital Assets, Financial Technology, and Inclusion Subcommittee and Johnson leading the Commodity Markets, Digital Assets, and Rural Development Subcommittee.
One might wonder why the House Agriculture Committee is concerned about cryptocurrencies, as one of the responsibilities of the Agriculture Committee is to oversee commodities, and historically most commodities have been agricultural products, such as corn, soybeans, and wheat. In 1974, the federal government established the Commodity Futures Trading Commission (CFTC) to oversee commodity futures trading, and it is still the Agriculture Committee that authorizes the CFTC and handles futures trading. In a statement, the Agriculture Committee said it is interested in all types of commodity markets, including commodities that emerge through new technologies, such as cryptocurrencies and cryptocurrency futures trading.
Content and impact
The bill clarifies the cryptocurrency regulatory roles of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), and gives the Commodity Futures Trading Commission (CFTC) jurisdiction over digital commodities, including exchanges, brokers, and dealers related to digital commodities. According to the bill fact sheet published by the co-sponsors, approximately 70% of crypto tokens are more appropriately considered commodities rather than securities, that is, 70% of tokens should be governed by the Commodity Futures Trading Commission (CFTC), and it is pointed out that tokens cannot be classified as securities based on investment contracts alone. The following is the definition of digital commodities in the bill. It can be found that the main conditions for digital assets to be considered digital commodities are decentralization and the functionality of the associated network.
Market participants must comply with new, more comprehensive disclosure requirements. Intermediaries can register with the SEC or CFTC depending on whether the relevant subject matter is a digital commodity. If both are involved, they need to register with both the SEC and the CFTC (DUAL REGISTRATION).
The bill defines digital assets as "any fungible digital representation of value", thus explicitly excluding NFTs. The bill also lists related "ancillary activities" that are not subject to this bill, including key blockchain support and operational services and actions, such as "compiling network transactions", "providing computing work", "providing user interfaces", "developing, publishing, building, managing, maintaining or otherwise distributing blockchain systems", etc.
This bill represents a good first step towards properly regulating the digital asset industry and is a response to the need for regulatory clarity in the digital asset space.
process
On July 27, the House Financial Services Committee passed the bill; on July 28, the House Agriculture Committee passed the bill; the legislation will next be sent to the House for a full vote.
The bill faces obstacles from the Democratic Party, and many people believe that the SEC should play a greater role than the bill currently allocates. For example, Maxine Waters, a Democratic congressman from California, once said that she had never thought that she should give such strong support to the CFTC; Hilary Allen, a professor at the American University Washington School of Law, criticized the bill as a Republican effort to please crypto exchanges, Wall Street and Silicon Valley venture capitalists. It is doubtful whether the bill can be passed in the Senate controlled by the Democrats.
2. Clarity for Payment Stablecoins Act
sponsor
The Clarity for Payment Stablecoins Act was proposed by Patrick McHenry, chairman of the House Financial Services Committee. It is the latest version of a series of stablecoin legislative drafts he has been involved in since last year. The bill aims to provide a regulatory framework for stablecoins and protect consumers by establishing uniform standards for the issuance of stablecoins.
Main content and impact
The bill introduces capital, liquidity and risk management requirements, requiring licensed stablecoin issuers to hold reserves to support the issued stablecoins, publish the composition of their reserves monthly, publicly disclose their redemption policies, establish timely redemption procedures, and reserves held cannot be pledged, re-pledged or reused unless it is to create liquidity to meet redemption requests. Issuers outside the United States must seek registration to conduct business in the country.
Although it may increase compliance costs, the bill is conducive to the further development of stablecoins and DeFi, and has positive significance for RWA. Projects around assets such as fiat currencies and treasury bonds can be carried out legally and compliantly, paving the way for the large-scale development of RWA. Coinbase Chief Legal Officer paulgrewal.eth said on social media that the vote to pass the Payment Stablecoin Clarity Act provides important protection for American investors.
process
On July 28, the U.S. House of Representatives Financial Services Committee passed the U.S. stablecoin regulatory bill, the Payment Stablecoin Transparency Act, by a vote of 34 to 16. The bill also faces obstacles from the Democratic Party. Massachusetts Democrat Stephen Lynch suggested postponing the vote until September, saying that the Democrats did not have enough opportunities to express their ideas. California Democrat Maxine Waters believes that the bill may lead to unhealthy license competition and said that neither the Federal Reserve nor the U.S. Treasury Department supports the current status of the bill.
3. Keep Your Coins Act of 2023
The bill aims to protect consumers' rights to keep Bitcoin in self-custodial wallets, ensure individual users' freedom and privacy when managing their own crypto assets, and emphasize that giving individuals full control over their digital assets may have a significant impact on the cryptocurrency landscape through the principles of decentralization and financial autonomy.
On July 28, the Save Tokens Act was passed by the House Financial Services Committee and will be submitted to the House for a vote in the future.
4. Blockchain Regulatory Certainty Act
sponsor
On March 23, 2023, U.S. House of Representatives Tom Emmer and Darren Soto introduced the Blockchain Regulatory Certainty Act to Congress. The initiator, House Majority Whip Tom Emmer, is considered the most supportive legislator in the House of Representatives for the crypto industry. He once supported the SEC Stability Act submitted by House Representative Warren Davidson, which calls for the reorganization of the U.S. SEC and the dismissal of its chairman Gary Gensler. On May 18, Tom Emmer and Darren Soto also launched the bipartisan Securities Clarity Act. There is no further news on the Securities Clarity Act.
Main content and impact
The bill aims to clarify the regulatory obligations of blockchain developers and service providers without control, and introduces a "safe harbor" clause for blockchain developers and blockchain service providers, which states that blockchain developers and non-custodial service providers (including miners, validators, and wallet providers) that do not custody consumer funds should not be considered money transmitters and should not be subject to the same level of regulation as cryptocurrency exchanges that provide custody services. As long as these entities cannot control the digital assets held by users on their platforms, they will not be classified as money transmitters or financial institutions that require licensing or registration, and will be exempt from specific licensing requirements.
process
On July 27, the Blockchain Regulatory Certainty Act was passed by the House Financial Services Committee.
5. THE CRYPTO-ASSET NATIONAL SECURITY ENHANCEMENT AND ENFORCEMENT (CANSEE) ACT
sponsor
Introduced on July 18 by Senator Jack Reed and co-sponsored by Senators Mark Warner (D-Va.), Mike Rounds and Mitt Romney (R-Utah), it is a bipartisan bill focused on money laundering and sanctions compliance. Jack Reed named the bill “THE CRYPTO-ASSET NATIONAL SECURITY ENHANCEMENT AND ENFORCEMENT (CANSEE) ACT” on his personal website.
Main content and impact
The bill aims to prevent money laundering and sanctions evasion in DeFi and modernize the Treasury Department's main anti-money laundering agency, requiring DeFi protocols to comply with the same anti-money laundering and related economic sanctions rules as other financial institutions, including maintaining anti-money laundering programs, conducting due diligence on their customers, and reporting suspicious transactions to the Financial Crimes Enforcement Network (FinCEN). The bill requires the controller of the DeFi protocol to ensure that the anti-money laundering program is effective. If the protocol has no identifiable controller, the person who invested more than $25 million to develop the protocol will be responsible. For example, if a sanctioned person (such as the Russian oligarch) uses DeFi services to evade US sanctions, then the person who controls the project or invests more than $25 million to develop the project (without a real controller) will be responsible for assisting such violations.
There are currently about 30,600 cryptocurrency ATMs in the United States. The bill requires crypto asset ATM operators to comply with KYC laws to ensure that they do not become carriers of illegal activities such as money laundering. The bill will deal a blow to the development of DeFi in the United States.
process
The bill is the result of bipartisan cooperation, especially its goal of strengthening national security, giving it a better chance of receiving a vote by the full House, which has not yet entered the committee vote stage.
6. National Defense Authorization Act (NDAA) for Fiscal Year 2024
The National Defense Authorization Act is an annual bill proposed by the United States Congress that redefines the U.S. military budget for the following year. The House of Representatives and the Senate have proposed the National Defense Authorization Act for Fiscal Year 2024, H.R. 2670 and S. 2226, respectively.
On July 28, 2023, the U.S. Senate passed the National Defense Authorization Act for Fiscal Year 2024, which included amendments to strengthen regulation of cryptocurrency trading financial institutions, mixers, and "anonymity-enhancing" crypto assets. The amendment was proposed by a bipartisan group of U.S. senators, including New York Democrat Kirsten Gillibrand, Wyoming Republican Cynthia Lummis, Massachusetts Democrat Elizabeth Warren, and Kansas Republican Roger Marshall.
The amendment was made based on the Lummis-Gillibrand Responsible Financial Innovation Act of 2023 (S.4356) and the Digital Asset Anti-Money Laundering Act introduced by Warren and Marshall in 2022, aiming to strengthen anti-money laundering and anti-terrorism supervision of cryptocurrencies and combat anonymous transactions of cryptocurrencies. It requires the Secretary of the Treasury to develop review standards for crypto assets to help reviewers better assess risks and ensure compliance with money laundering and sanctions laws; and the Treasury Department to conduct research on "combating anonymous crypto asset transactions", especially for mixers. The passage of the bill will strengthen the United States' anti-money laundering efforts against cryptocurrencies. Now the two houses need to negotiate on a unified version that can be passed by both houses.
The Lummis-Gillibrand Responsible Financial Innovation Act (S.4356) mentioned above was reintroduced by Senators Cynthia Lummis (R-Wyoming) and Kirsten Gillibrand (D-NY). Cynthia Lummis is a crypto supporter known as the "Queen of Cryptocurrency" in the Senate. The bill was considered the most comprehensive and bipartisan crypto bill in the history of the Senate. The collapse of FTX put the proposal on hold, and no new action has been taken since November 2022.
References:
https://foresightnews.pro/article/detail/38721
https://financialservices.house.gov/
http://www.npc.gov.cn/zgrdw/npc/zt/qt/xzdbtcf/2011-06/13/content_2054549.htm
https://en.wikipedia.org/wiki/118th_United_States_Congres
https://en.wikipedia.org/wiki/National_Defense_Authorization_Act_for_Fiscal_Year_2024
https://www.coindesk.com/policy/2023/07/28/us-senate-passes-886b-military-spending-bill-with-crypto-aml-provision/
https://www.congress.gov/bill/117th-congress/senate-bill/4356/all-actions
https://www.binance.com/en-AU/feed/post/874084
https://www.reed.senate.gov/news/releases/bipartisan-us-senators-unveil-crypto-anti-money-laundering-bill-to-stop-illicit-transfers
https://iq.wiki/wiki/clarity-for-payment-stablecoins-act-of-2023
https://iq.wiki/wiki/financial-innovation-and-technology-for-the-21st-century-act