Arizona Congressman Paul Gosar has introduced a draft bill designed to help regulate the cryptocurrency industry in the United States. Subject to a lot of speculation, attempts to bring in more clarity in the difficult sectors have been more common. Titled ‘The Crypto Currency Act of 2020,’ Congressman Gosar seeks to create a framework of clear-cut rules.
Types of Crypto Assets to Be Regulated Under the Crypto Currency Act
More specifically, the Act is designed to regulated each type of crypto asset and eliminate speculation from regulating the segment once and for all. However, preparing a different legislation for each type of crypto token would come with certain challenges.
To avoid red tape, Gosar has proposed three main types of crypto assets, such as currencies, securities and commodities. In other words, cryptocurrencies would be regulated the same way any FIAT currency is.
The bill also features language explaining the specifics of each type of asset. Crypto-commodities will be any economic goods or services that can be stored on a blockchain. Another important condition is to have a market that treats the commodity in a way that excludes its producer.
As to crypto securities, this financial instrument is related to all equity and derivatives on a blockchain, registered as law-abiding money services businesses, Forbes specified in an article reporting on The Crypto Currency Act.
Last, but not least, cryptocurrencies are defined as synthetic derivatives based on the blockchain technology or a decentralized ledger. The currency could be backed by the Federal Reserve or derived from smart contracts.
Creating the Regulators to Oversee Cryptocurrencies
To exert proper control over the assets, the Crypto Act plans on introducing a new regulatory body for each, proposed as a ‘Federal Digital Asset Regulator.’
Yet, the Act is open to leaving regulatory action in the hands of existing and proven institutions, such as the Commodity Futures Trading Commission (CFTC) for commodities and Securities and Exchange Commission (SEC) for crypto-securities.
Lastly, the Financial Crimes Enforcement Network (FinCEN) will take full control over regulating cryptocurrencies themselves. While cryptocurrencies want to be largely outside government control, the increasing incidence of crime in the sector has prompted industry figures and mainstream institutions to call for proper regulation.
Some have suggested that regulating cryptocurrencies would stifle innovation, but this is unlikely. According to Ripple CEO Brad Garlinghouse, 20 of the largest banks will adopt cryptocurrencies in 2020.
He also famously said that 99% of cryptocurrencies would disappear within a 10-year time window, because they failed to focus on real world problems. The United States, though, is faced with a problem as the industry is not regulated at all presently.
Meanwhile, the European Union is launching its own regulatory effort, the Fifth Anti Money Laundering Directive (5AMLD), designed to address money-laundering through the use of smart technologies, such as blockchain.