By Hannah Lang
Jan 13 (Reuters) – U.S. senators late on Monday unveiled draft legislation that would create a regulatory framework for cryptocurrency which, if signed into law, would clarify financial regulators’ jurisdiction over the burgeoning sector, potentially boosting digital asset adoption.
The crypto industry has long pushed for such legislation, often arguing it is existential to the future of digital assets in the U.S. and necessary to fix core, longstanding problems for crypto companies.
Among other things, the legislation would define when crypto tokens are securities, commodities or otherwise, giving the industry long-hoped-for legal clarity.
It would also give the U.S. Commodity Futures Trading Commission – the industry’s preferred regulator, as opposed to the U.S. Securities and Exchange Commission – authority to police spot crypto markets.
The bill also gives the banking industry a fix it had sought stemming from legislation signed into law last year to create a federal regulatory framework for dollar-pegged crypto tokens called stablecoins.
Bank lobbyists had urged Congress to close what they deemed a loophole in the bill that allowed intermediaries to pay interest on stablecoins. Banks have argued this would lead to a flight of deposits from the insured banking system, potentially threatening financial stability.
Crypto companies have fought back against that assertion, contending that prohibiting third parties, such as crypto exchanges, from paying interest on stablecoins would be anti-competitive.
“What is threatening progress is not a lack of policymaker engagement, but the relentless pressure campaign by the Big Banks to rewrite this bill to protect their own incumbency,” said Summer Mersinger, CEO of the Blockchain Association, a crypto industry trade group.
“Their demands to eliminate stablecoin rewards are designed to choke off consumer choice and kill innovative financial products before they can compete.”
Monday’s bill, which could change as senators consider amendments, prohibits crypto companies from paying interest to consumers solely for holding a stablecoin. However, it allows crypto companies to pay rewards or incentives to customers for certain activities, such as sending a payment or participating in a loyalty program.
The SEC and the CFTC would also be required to issue a joint rule requiring clear disclosures from crypto companies about rewards paid in connection with using stablecoins.
‘CRYPTO PRESIDENT’
The Senate Banking Committee is scheduled to debate the bill and consider possible amendments on Thursday. The Senate Agriculture Committee, which is writing its own version of the bill, will meet later this month to discuss its version.
