The Senate Friday proposed a bill for the comprehensive regulation of crypto currency and for digital assets akin to securities. Regulation of crypto, which is classed as a commodity, will rest with the Commodity Futures Trading Commission, while digital assets that function as investment vehicles will continue to fall under the SEC.
Regulation must be instituted within 180 days of passage of the bill, which is understood to have Presidential approval. Interestingly, Senator Lummis of Wyoming, a state with a concentration of digital businesses due to its almost unique statutory flexibility for chartering atypical entities tied to block-chain, was one of the bill sponsors.
Regulatory guidance would include addressing internal governance, external audits, policies providing operational controls, security of assets, mitigation of risk, and management changes. Intriguingly, also mentioned is organizational “culture,” a vague reference to the sometimes hyperbolic presentation of both cryptocurrency and digital assets by intermediaries.
Two other noteworthy items: guidance also will be aimed at use of digital assets for illicit activities; and, companies issuing digital currency will be given direct access to the Federal Reserve System’s mechanisms for payment transfers (now restricted to banking institutions; it is through utilization of banks that crypto currently is handled when transactions require it, which imposes a cost in dollars, delay and potential vulnerability).