FOR IMMEDIATE RELEASE
June 7, 2022
New Cryptocurrency Bill a Giveaway to Industry in the Name of Innovation
Washington, DC – A bill introduced by Sens. Kirsten Gillibrand and Cynthia Lummis to revamp regulation of cryptocurrencies is little more than a giveaway to an industry that wraps itself in the mantle of innovation but poses serious risks to investors, consumers, and possibly even financial stability.
“With cryptocurrencies cratering or collapsing entirely and an industry using an unproven technology, Congress should encourage regulators to use the tools they have to protect investors and consumers,” said Mark Hays, senior policy analyst for Americans for Financial Reform. “Instead, too many lawmakers are rushing to introduce legislation that, in the name of fostering innovation, could legitimize bad actors and bad practices. Just because an industry that pumps millions into the political process claims it is innovative does not mean it deserves its own special rulebook.”
Notably, the bill proposes an approach to classifying digital assets as securities that are linked to underlying ancillary assets, or tokens. This approach would cede more regulatory power to the Commodity Futures Trading Commission while undermining existing securities law and oversight by the Securities and Exchange Commission. The measure could even create a loophole that traditional securities issuers could exploit to avoid more robust disclosure requirements. Additionally, the bill would exempt small transactions from being reported as taxable income and allow cryptocurrency miners to defer tax payments for some activities, perhaps indefinitely. This step would incentivize an increase in wasteful, climate-harming mining activities, but the bill itself does nothing to address those environmental impacts, save authorizing a study.
This bill also comes as a rising number of experts are criticizing the quality of the underlying technology. Last week in collaboration with AFR, a group of software engineers and computer programmers wrote lawmakers with their concerns over the fundamental technological flaws they see in cryptocurrency and blockchain-based applications and urged these policymakers to question whether such technology is truly innovative. In less than a week, the number of signers of that letter has grown to 1500.
“For fear of missing out, some policymakers are rushing to introduce legislation that would serve digital asset industry interests instead of the public interest,” Hays said. “They should instead question the fundamental value of these risky, unproven assets, seek oversight measures that rein in the industry’s abuses, and pursue alternatives policies that promote real financial inclusion.”