“Cryptocurrency” is the reigning moniker for blockchain-based digital assets the world round, not just in America.
But if new legislation put forth in the U.S. passes, users in America’s nook of the cryptoeconomy can expect to officially deal with three types of crypto: cryptocurrencies, crypto-commodities, and crypto-securities.
That’s per the Crypto-Currency Act of 2020, which Republican Arizona congressman Paul Gosar introduced to the U.S. House of Representatives this week for deliberation.
The crux of the draft bill? To clarify which U.S. regulators deal with which cryptocurrency projects. That’s because to date, America’s standing laws have led to patchwork federal crypto rules, upon which top U.S. regulators have had different opinions: the SEC has hitherto viewed most cryptos as securities, the CFTC considers many as commodities, and FinCEN sees them as being like money.
Unsurprisingly, these claims have been competing and have fostered a foggy regulatory environment toward crypto in the U.S., a dynamic that has led many blockchain startups to focus their operations overseas in legally friendlier jurisdictions in recent years, namely Germany and Singapore.
Toward Three Kinds of Crypto Assets
Notably, Rep. Gosar’s draft bill would define which American regulators have a say with regard to domestic crypto activities.
To that end, the legislation would slot “cryptocurrencies” under FinCEN’s purview, “crypto-commodities” under the CFTC’s purview, and “crypto-securities” under the SEC’s jurisdiction.
Moreover, the would-be bill would task these three financial watchdogs with having to “to notify the public of any Federal licences, certifications, or registrations required to create or trade in such assets, and for other purposes.”
So what about the definitions, then?
If passed, the draft bill would consider crypto-commodities to be blockchain-based digital assets that have “full or substantial fungibility” and offer little “regard as to who produced the goods or services.”
Likewise, a crypto-security would be “all debt, equity, and derivative instruments that rest on a blockchain or decentralized cryptographic ledger.”
Lastly, Rep. Gosar’s bill would characterize cryptocurrencies as 1) blockchain representations of the U.S. dollar, 2) reserve-backed digital assets, and 3) as synthetic deriviatives that are “determined by decentralized oracles … or smart contracts; and … collateralized by crypto-commodities, other crypto-currencies, or crypto-securities.”
The legislation would also define stablecoins, a first in the U.S., as blockchain-based assets that offer a “representation of currency issued by the United States or a foreign government” and that are “fully backed by such currency on a one-to-one basis and fully collateralized in a correspondent banking account.”
Such definitions would clash against recent calls in the U.S. to characterize stablecoins as securities and would seemingly slot so-called utility tokens as cryptocurrencies or crypto-commodities.
U.S. Legislators Want Crypto Tax Clarity, Too
Another major thread in American crypto regulation is taxes, as the Internal Revenue Service (IRS) has considered cryptocurrencies to be “property” for years now.
Whether Rep. Gosar’s crypto draft bill has the muster to pass the House remains to be seen, but other representatives in the body have moved to take the IRS to task over the reigning ambiguity around crypto taxes in the U.S.
That’s because this week, eight congressional officials, including ecosystem proponents like Rep. Bill Foster, Rep. Tom Emmer, Rep. Darren Soto, and Rep. Warren Davidson, sent a letter to the commissioner of the Internal Revenue Service seeking clarification for their constituents as to how crypto forks and airdrops should be taxed.
“The IRS needs to provide guidance to taxpayers as to how income related to all crypto transactions will be treated for tax purposes,” the legislators said.
The move comes after the IRS published rather confusing guidance back in the spring around how U.S. users should pay taxes on their cryptocurrency assets.