|You can find the full Lummis-Gillibrand bill here.
It seems to set up reams of regulatory hoops for digital currencies and assets and their exchanges to jump through. For instance, it requires a bunch of new mandatory disclosures to consumers. And “each year, the chief executive officer of a crypto asset intermediary shall, under penalty of perjury, certify compliance” with these consumer disclosures, as well as “applicable anti-money laundering, customer identification, prevention of terrorist financing, and sanctions laws,” and more, the bill’s text states.
“So if a company says it’s disclosing certain consumer protection information & then doesn’t do that, the CEO can be criminally charged with perjury,” notes Slaughter.
Theoretically, this is meant to deal with the Sam Bankman-Frieds of the world. But it seems like the sort of intervention that could ensnare people for simple oversights, too.
Some of the bill’s provisions certainly could have positive and protective effects for consumers. Or they could be time- and resource-wasting bureaucratic nonsense that would, at worse, give the government more leeway to play gotcha with crypto businesses and invade the privacy of crypto users. The new bill just dropped, so we’re still in the period of puzzling out what it will really mean for the crypto industry.
One red flag: The bill would change the Federal Deposit Insurance Act to make money-laundering offenses involving crypto assets punishable by up to five years in prison—which could have a big effect, considering how broad some money laundering statutes reach.
The bill’s establishment of an interagency law enforcement working group to combat illicit crypto use also seems ripe for inviting government snooping and overreach.
In other sections, the Lummis-Gillibrand bill includes tax provisions, some good and some bad. “Token sales with a gain below $200 aren’t taxed,” notes Slaughter. And “trading crypto counts as capital gains income, not regular income, just like in commodities/securities.”
“One major criticism from the [crypto] community…was the fact that the Act intends to uphold the Howey test,” notes FXStreet. “The test is used to determine whether a transaction qualifies as an investment contract in the US which in turn labels the assets involved in the process as Securities….This test has been criticized by many for being outdated and is also the subject of controversy in the ongoing SEC vs. Ripple lawsuit.”