Bitcoin and other cryptocurrencies are among the latest substantial developments in how we interact with the online world. They’ve only been around for 13 years, with Bitcoin launching in 2009 as the very first cryptocurrency.
While they’ve been on the radar of governments around the world for years, interest spiked sharply with the meteoric rise in value that took place at the end of 2020 and the start of 2021. Since then, governments around the world have been scrambling to implement effective regulatory frameworks.
Their approaches have varied widely, with some countries like China choosing to ban cryptocurrencies entirely. In the United States, the response has been much more positive, but there is still significant contention over what form finalized cryptocurrency regulations will take.
There have been several key developments over the past year that are set to build the foundation for crypto regulation in the United States. These developments are ongoing, and it still isn’t clear exactly what form the final regulatory framework will take.
The Responsible Financial Innovation Act
One of the latest developments in the ongoing crypto regulation saga is the consideration of a new bill introduced in June 2022. This new bill represents a bipartisan effort to implement effective crypto regulation and could become the foundation for a regulatory framework if it successfully passes.
The bill, titled the RFIA (Responsible Financial Innovation Act), came from US senators Cynthia Lummis and Kirsten Gillibrand, a republican and democrat, respectively. In the current divided political landscape, this bipartisan bill stands apart as a cooperative effort among the two US political parties.
Among the most important elements of the proposed bill is a tax structure that could see cryptocurrencies used more effectively for their intended purpose. While existing tax schemes see Bitcoin as a digital asset that is taxed accordingly, the new scheme would allow for transactions under $200 to be tax-free.
This opens the door to straightforward cryptocurrency use in everyday transactions without the need to consider gains and losses. Instead of being seen as a series of transactions in which the cryptocurrency is converted to fiat currency and taxed on any profits, they could be used as a currency directly.
The bill is expected to work its way through Congress next year, and it could face considerable challenges there. The bill could be divided into multiple pieces of legislation, allowing for some changes to pass while others don’t.
Stablecoins are another major area of contention that the bill seeks to address. Crypto securities and commodities would become more strictly defined, falling under the authority of the CFTC. There would be significantly increased requirements for stablecoin developers to disclose details.
The Impact of the Supreme Court
The end of June saw the release of a decision by the US Supreme Court in the case of West Virginia v. The Environment Protection Agency (EPA). At first glance, this judgment reigning in the authority of the federal regulatory agency to regulate without clear congressional authorization doesn’t seem to have much to do with cryptocurrency regulation.
However, it is believed that this case will have wide-reaching consequences in many regulatory areas, including cryptocurrencies. It establishes limits on the ability of federal agencies like the EPA to essential make new laws through their regulations, a power that US Supreme Court Chief Justice John Roberts argues lies with Congress.
This casts doubt on the legitimacy of regulations put in place by other federal regulatory agencies, including the CFTC and the SEC. These two agencies are responsible for much of the cryptocurrency regulatory framework currently in place and would play an integral part in the proposed Responsible Financial Innovation Act.
If the case does go on to have wider consequences, as many believe it will, these agencies could become powerless to shape cryptocurrency regulations. This means that any changes would have to go through Congress in the form of new legislation, which could greatly extend the process or even grind it to a halt.
It’s also worth pointing out that calls for tighter regulation are also increasing after various “trading robots” like the latest Immediate Edge were exposed on various industry portals such as ScamCryptoRobots.com.
The Future of Cryptocurrencies in the US
These two recent developments are still incredibly fresh, and there’s no way to know at this point how they will impact cryptocurrency regulations. While the exact nature of a future regulatory framework is unknown, the US is moving toward better-defined crypto regulations.