A proposed US law that would treat cryptocurrency as a commodity marks a milestone in digital asset development, says the president of the American Blockchain and Cryptocurrency Association.

Two senators, Republican Cynthia Lummis of Wyoming and Democrat Kirsten Gillibrand of New York, introduced a bipartisan bill, the Responsible Financial Innovation Act, on Tuesday. It calls for long-sought federal oversight of crypto assets.

Bitcoin (BTC) to USD

Catching up with friendlier nations

“Quite honestly, it sets the stage for crypto companies to feel more confident about setting up shop in the US,” ABCA president Howard Greenberg told Capital.com.

Based in Washington, DC, the ABCA serves as a non-profit trade association for the blockchain and crypto sector, emphasizing advocacy and education while representing bitcoin miners and digital asset investors, innovators and entrepreneurs.

Many blockchain and digital asset developers have opted to locate in other jurisdictions, such as Singapore and Dubai, that are viewed as more crypto-friendly.

The bill calls for major cryptocurrencies to be regulated as commodities rather than securities. US Securities and Exchange Commission (SEC) chief Gary Gensler has drawn the wrath of crypto developers by stressing the need for digital coins and NFTs to be treated as securities. Gensler has contended that digital assets do not have the necessary investor protections in place.

Howard Greenberg, ABCA President (Photo: ABCA)

‘Positive step forward’

The proposed law would make “a clear distinction between digital assets that are commodities or securities,” says a summary of the legislation contained in a news release issued by the two senators. And if passed, the law would grant “digital asset companies the ability to determine what their regulatory obligations will be.”

The CFTC would oversee spot markets for cryptocurrencies viewed as commodities and the SEC would regulate digital assets that, like companies, entitle the holders to “profits, liquidation preferences or other financial interests in a business entity.”

“This is the rails that we’ve been looking for,” said Greenberg, referring to regulatory guidelines.

The recent collapse of the original LUNA coin and the depegging of related stablecoin TerraUSD, brought to light systemic risk that can occur if digital assets are not regulated, he added. LUNA has since been replaced by LUNA2.

Senator Cynthia Lummis (Photo: Getty Images)

‘Most comprehensive’

“This is definitely the most comprehensive and well thought out [cryptocurrency-related] bill so far,” said Greenberg.

The SEC would also have the authority, twice per year, to review commodity cryptocurrencies that are not fully decentralized.

“The United States is the global financial leader, and to ensure the next generation of Americans enjoys greater opportunity, it is critical to integrate digital assets into existing law and to harness the efficiency and transparency of this asset class while addressing risk,” Lummis, a strong crypto advocate, said in the news release.

Senator Kirsten Gillibrand (Photo: Getty Images)

‘Protects consumers’

In the news release, Gillibrand said the proposed law will establish a regulatory framework that “spurs innovation, develops clear standards, defines appropriate jurisdictional boundaries and protects consumers.”

But the bill must travel a long road before the intended law can become reality.

‘First step’

“It’s going to take a while,” said Greenberg. “This is the first step. Nothing in DC goes through quickly, in general. It’s definitely going to be complicated.”

It remains to be seen whether the current US Congress can decide the bill’s fate before the current congressional term expires.

Will bill pass?

Owen Tedford, a senior research analyst at Beacon Policy Advisors, called the bill “an important step in the process toward comprehensive cryptocurrency legislation,” but in a recent note to clients said its passage this year still faced long odds, MarketWatch reported.

“The bill is very likely to resurface even if control of the senate changes,” Tedford wrote, according to MarketWatch. “It is best to see this as one step on a winding road, but these discussions now will influence the shape of any future bill.”

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