Cryptocurrency Act of 2020 – What is the new bill about?

Paul Gosar, United States Representative, has introduced to Congress a new bill – the Cryptocurrency Act of 2020. The bill petitions to set clearer regulations on cryptos. Gosar stated that it would make it easier for businesses, and people to take part in the growing industry, without further uncertainty, or confusion. 

According to the bill, specific federal agencies will participate in the regulation of digital assets. It also highlights that those agencies would inform the public of its grant of federal licenses, registrations, and certificates. However, entities creating or trading digital assets would have to seek government approval first.

Cryptocurrencies, crypto-commodities, and crypto-security – why such differentiating?

Gosar divided crypto assets into three parts: “crypto-currency,” “crypto-commodity,” and “crypto-security.” He set aside different regulatory ambits for each of them.

The primary regulators for crypto-currencies will be the Comptroller of the Currency and the Financial Crimes Enforcement Network (FinCEN). However,  the Commodity Futures Trading Commission (CFTC) will primarily regulate crypto-commodities.

On the other hand, the Securities and Exchange Commission (SEC) will be the primary regulator For crypto-securities and “synthetic” stablecoins. It includes stablecoins because essentially, stablecoins function similarly as securities.

There will also be several additional rules for cryptos. For example, they will be required to allow FinCEN to trace crypto transactions, as well as the individuals involved in the corresponding transactions. However, such a rule means that cryptos will get the same regulatory treatment as traditional financial institutions.

Furthermore, FinCEN will also have the right to conduct audits for each reserve-backed stablecoin to ensure that each of them is fully backed by currencies issued by the local or foreign authorities they represent.

While the bill’s several requirements go against crypto’s nature to be intractable, it seems that some cryptocurrency owners still support it. Bitcoin millionaire Erik Finman participated in the drafting of the bill.

Goldey stated that they worked with stakeholders and outside experts to decide what to improve. They also chose to gather stakeholder support before starting work toward cosponsors.