'Bitcoin Senator' Renews Push to Remedy Crypto’s ‘Erratic Regulatory Framework’

By Nicholas Morgan

Two U.S. senators are taking another crack at putting together a bill to regulate the digital asset sector.

In an appearance on CNBC’s Squawk Box on Wednesday morning, Sen. Cynthia Lummis (R-WY)—unofficially known as the Bitcoin senator—announced that she and Sen. Kirsten Gilibrand (D-NY), were making a renewed push to pass an updated version of a crypto regulation bill they co-sponsored last year. 

"It’s important to move ahead when we see so much more integration of digital assets in our economy," the Wyoming Republican said on CNBC. 

In a follow-up on Twitter, Lummis shared a chart that briefly detailed some of the proposals in her bill with Gillibrand. It included registration requirements for crypto exchanges and how the legislation would divide regulatory responsibilities between different agencies.

The fresh push comes at the same time as the industry is witnessing a mixture of tailwinds and headwinds. 

On the regulatory side, the Securities and Exchange Commission launched lawsuits against the two biggest cryptocurrency exchanges in June: Binance and Coinbase. The lawsuits, which named nearly a dozen tokens as securities, shocked the industry and sparked fears about the future of crypto in the United States. 

But there have also been some bright spots. On June 15, BlackRock filed an application for an exchange traded fund in Bitcoin spot markets, and it was swiftly followed by others like Invesco, Valkyrie, and Ark Invest. The exuberance from these filings buoyed Bitcoin to highs not seen since last year.  

Lummis characterized the proposed bill, a new version of last year's Responsible Financial Innovation Act, as a way to meet both of these moments. In its previous form, it aimed to address some of the thorniest issues facing crypto, including language on how to categorize a token as a security or a commodity, which would also clear up which regulator issuers would deal with—the SEC or Commodities Futures Trading Commission (CFTC).

After its previous iteration fell short, Lummis promised earlier this year that the "slimmed-down" draft would take into account feedback from regulators and the industry. In her interview, Lummis repeated her criticism of the SEC’s enforcement driven approach to crypto, but said it and Congress share blame for failing to set any clear rules.

“I think both Congress in its reticence [to pass a bill] and the SEC in its lack of proactive guidance to companies are both responsible for some of the erratic regulatory framework that we have now," said Lummis.

To correct this, Lummis said the agency’s input was included on parts clarifying when a token is a security or a commodity. To address this, Lummis said a new authority would be created that included officials from the SEC and the Commodities Futures Trading Commission to deal with these. 

News of the RFIA's updates was greeted warmly by the cryptoverse. Georgia Quinn, general counsel for  digital asset bank Anchorage Digital, told Decrypt in an email that it’s a "major step forward from the Senate." 

"Bipartisan legislation is the best path forward for regulatory clarity, consumer protections, and market structure reform in the digital asset ecosystem," she said.

Gabriel Shapiro, the general counsel for Delphi Labs, struck a more lukewarm tone on Twitter. While acknowledging that the text of the bill has not emerged yet to judge, it appeared "too deferential" to existing securities laws and expressed caution over other aspects that he warned could lead to confusion.

"I am worried what feedback they took from SEC and suspect that feedback will likely increase gray area by deferring to existing Howey test standard rather than rewriting the securities laws to cover certain tokens sensibly," tweeted Shapiro.

The House bill has been shepherded through two GOP-led committees, and still remains in the works. 

Rep. Patrick McHenry, the chairman of the House Financial Services Committee and one of the bill’s chief advocates, said that he wants the final bill to be a bipartisan proposal. House Democrats have not written off the bill, but voiced concerns over certain provisions that they see as sparing bad actors from punishment and for weakening the SEC.

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