All You Need To Know About The Landmark Bill On Bitcoin And Digital Assets

Bitcoin and crypto bill

The US Senate is poised to debate a landmark bill on Bitcoin and digital assets. The bill was officially released on June 7 by the US senator from the state of Wyoming, Cynthia Lummis. According to the bipartisan bill, Bitcoin use as a medium of exchange should be encouraged. In the same vein, the bill proposes that transactions, up to $200 be exempted from taxation.

On digital currency classification, the bill proposes a framework which would help differentiate whether a specific asset is a commodity or a security. The bill uses the Howey test to determine if an ancillary asset is a security or a commodity.

Ancillary asset was defined by Namcios, a Bitcoin analyst as,

“An intangible, fungible asset that is offered, sold or provided to a person in connection with the purchase and sale of a security through an arrangement or scheme that constitutes an investment contract.”

If the asset provides the holder a debt or equity interest in a business setting, rights to liquidate, interest entitlement, revenue share, profit or dividend, it is considered a security.  The emphasis is on these benefits being derived from managerial efforts of others.

Exemption Disclosure

Exemptions are not fully decentralized digital assets that benefit from managerial skills but not debt or equity. If these do not give profit rights and financial benefits, they’re not classified as securities if they file disclosures with the SEC twice a year.

The status of ancillary assets as a commodity can be contested by the SEC in a court. This means that if the regulator considers an asset a security, it can go to court to prove that.

The bill, in its implications, has essentially classified most decentralized assets such as Bitcoin and Ethereum as commodities. The bill by Senator Lummin has given the CFTC oversight functions over most decentralized assets like BTC. Those that are classified securities will come under the purview of the SEC.

Prospects for ETF in The US

The Lummis-Gillibrand bill gives the CFTC the exclusive jurisdiction over the spot market for digital assets that are classified as commodities. This implies that exchanges register with the CFTC. This means that US spot ETF will be easily approved if the bill is passed into law.

SEC, CFTC and SRO

The bill also tasks the CFTC and SEC to complement the activities and formation of self-regulatory organizations in the bid to build a robust regulatory space for the industry.

The agencies were also mandated by the bill to develop cybersecurity guidance for digital currency providers.

Energy Concerns

The bill on digital assets recommends that more study be carried out on the energy demand of Bitcoin mining. This is with the objective of determining how best to develop a framework that is in concord with the demands for cleaner energy.

On miners, the bill proposes that their activities and mined bitcoins are not considered income until such cryptocurrencies are converted to fiat.

For the DeFi space, the bill states that lending services are not taxable activities.

The bill demands that the Government Accountability Office (GAO) conducts a comprehensive study of the risks and opportunities associated with associating retirement accounts (401k) with digital assets. The result of the analysis will be reported to the Congress, Labor Department and Treasury Department.

Disclosures & Self-Custody

The bill demands that project teams for digital assets disclose all information regarding their assets. These include source codes and the legal implication of their cryptocurrencies.

It further highlighted the rights of entities for self custody of their coins or assets.

 

Author: Jofor Humani

Jofor is a crypto journalist with passion for investigative review of projects with the aim to determine the authenticity of their claims.

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