US Congress to clarify crypto regulations once the Senate passes bipartisan bill

• The Eliminate Barriers to Innovation Act was passed by the US House of Representatives and is now heading to the Senate and President for approval.
• The new bill mandates creating a working group to explore cryptocurrency regulation between the SEC and CFTC.
• The Treasury is also looking at a new cryptocurrency regulatory approach. 

The United States House of Representatives passed legislation that could clarify regulations around cryptocurrencies if approved by the Senate.

SEC and CFTC to form a working group to explore the crypto market

The Eliminate Barriers to Innovation Act, first introduced in March by Republican Patrick McHenry, would mandate the creation of a joint digital asset working group between the Securities & Exchange Commission (SEC) and the Commodity & Futures Trading Commission (CFTC).

The working group would be made up of both SEC and CFTC employees to advise them on how to address digital assets. Members of FinTech companies working in the cryptocurrency space could also take part in the working group. Financial companies that either agency oversees and academic researchers would also take part. 

Congress aims to answer several unresolved questions, including how regulations are affecting the digital asset markets and how the cryptocurrency market could be fairer, more efficient, and more transparent. It also aims to understand whether the laws in the country are making the US more or less competitive in financial technology and what security standards should be in place for cryptocurrency custodians and service providers. 

The bill would enable further recommendations on how the US could reduce fraud and price manipulation in the cryptocurrency market to protect investors. Republican leader McHenry said:

This is the first step in opening up the dialogue between our regulators and market participants and move to needed clarity.

In light of derivatives exchange BitMEX’s founders being accused of violating the Bank Secrecy Act, Congress aims to explore how crypto firms can best comply with the law. The Bank Secrecy Act requires financial institutions to prevent terrorist financing and combat money laundering. 

At this point, the Eliminate Barriers to Innovation Act has become one of the first bills that explicitly address cryptocurrencies to be passed by one of Congress’s two institutions. There would be a one-year window to analyze the current laws and regulations around cryptocurrencies in the US. 

More clarity could give way to regulated Bitcoin ETF

The SEC and CFTC have struggled to define whether cryptocurrencies are securities or commodities. As seen in the latest high-profile case around the SEC’s $1.3 billion lawsuit against Ripple, the securities regulator states that XRP tokens were issued as securities; however, the blockchain firm claims it is a commodity, which is outside of the SEC’s scope. 

While new SEC Chair Gary Gensler awaits further instructions from the Treasury on the overall policy approach to crypto, Fox News Correspondent Charles Gasparino recently suggested that regulations could come very soon, which he described as moving past the “second inning.” He emphasized that the Biden administration is developing a regulatory approach through the Treasury Department.

Additionally, the SEC has been delaying the decision of whether to approve a Bitcoin ETF.  Clarity on cryptocurrency regulations in Congress could lead to subsequent approval of a Bitcoin ETF in the United States, given its northern neighbour Canada has already approved several crypto ETFs. Gasparino further suggested that Gensler would likely push for approval to win the Republicans over on other policy goals he aims to accomplish at the SEC. Clarity on cryptocurrency regulations in Congress could lead to an approval.