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From crypto tax easing to greater regulatory oversight, U.S lawmakers have been abuzz with new initiatives concerning digital currencies. VIXIO reviews a (a)typical seven-day period, showing that widespread discussions on various aspects of digital assets are firmly on the table on Capitol Hill.
Thursday, February 3
The busy week for crypto legislative initiatives began last Thursday when House Representative Suzan DelBene (D-WA) introduced the Virtual Currency Tax Fairness Act, a bipartisan bill that would exempt small virtual currency transactions from tax reporting obligations.
Currently, any gains from virtual currency must be reported as taxable income regardless of the size or purpose of the transaction, including for example a purchase to buy a cup of coffee. Individuals are required to calculate and report any changes in the currency’s value against the U.S. dollar from the time they purchased the currency until it is used in the transaction.
This makes the everyday use of virtual currency near impossible, discouraging people from using it and inhibiting the growth of our digital economy, the Congresswoman said.
The new act would require virtual currency gains to be reported to the tax agency only if the gain exceeds $200, promoting the use of virtual currencies as a means of payment.
“Antiquated regulations around virtual currency do not take into account its potential for use in our daily lives, instead treating it more like a stock or ETF. However, virtual currency has evolved rapidly in the past few years with more opportunities to use it in our everyday lives,” said DelBene.
“This commonsense bill cuts the red tape and opens the door to further innovations, ultimately growing our digital economy.”
Friday, February 4
The following day, the eyes turned to the House as it voted on the America COMPETES Act, legislation aimed to ensure the competitiveness of the U.S. against China.
The legislation includes a number of key provisions relating to financial services. One of these would update authorities at the Financial Crimes Enforcement Network (FinCEN) when it issues special measures over primary money laundering concerns.
Critics had argued that the language used in the original version of the bill would give much greater powers to FinCEN to block crypto firms suspected of illicit transactions without public input.
The wording has been changed before the vote to include safeguard restrictions currently provided by the Bank Secrecy Act.
The House passed the bill largely along party lines, and it now heads to the Senate for consideration.
Monday, February 7
The U.S. Government Accountability Office (GAO) published findings of a review on the use of virtual currencies in human and drug trafficking and made recommendations to FinCEN and the Internal Revenue Service (IRS) to improve reporting by crypto ATM kiosks on Monday.
Currently, kiosk operators are required to register with FinCEN, but GAO found they are not required to routinely report the specific locations of their kiosks.
According to the agency, this limits the ability to identify kiosks in areas that have been designated as high risk for financial crimes and could involve human and drug trafficking.
Therefore, the office recommended FinCEN, in coordination with the Inland Revenue Service (IRS), review the money service business (MSB) registration requirements for virtual currency exchanges and virtual currency kiosks administrators, and take appropriate actions as needed.
Tuesday, February 8
The next day, members of the Congress came together to discuss the findings of the notable stablecoin report compiled by the President’s Working Group last November.
In that report, federal financial agencies and the Treasury made a number of recommendations to Congress on how to best legislate stablecoins when they are used as a means of payment.
Among the recommendations, federal regulators were seeking legislation that requires stablecoin issuers to be insured depository institutions and to bring custodial wallet providers under appropriate federal oversight.
The report also stressed that in the absence of Congressional action, the regulators may use their existing authorities to make sure consumers and investors are protected and the value-pegged digital asset is not used for illicit finance.
House representatives have now questioned Nellie Liang, undersecretary for domestic finance at the Treasury, about how to put the recommendations into practice. However, the four-hour long debate suggests there is still a long way to go until the members of Congress agree on a key issues in a potential stablecoin regulation.
The Senate is expected to hear Liang speaking on the same issue next Tuesday (February 15).
Wednesday, February 9
Also on Capitol Hill, Commodity Futures Trading Commission (CFTC) chairman Rostin Behnam told senators his agency is ready to play a greater role in the oversight of cryptocurrencies.
Speaking at a hearing in the Senate Committee on Agriculture, Behnam stressed “the CFTC is well situated to play an increasingly central role in overseeing the cash digital asset commodity market.”
Currently, the U.S. has a very complex and multi-layered regulatory landscape for crypto-assets. There are numerous federal financial regulators overseeing different aspects of cryptocurrencies, while state departments of financial services can also supervise crypto firms through state money transmitter licensing.
“In fact, there is no one regulator, either state or federal, with sufficient visibility into digital asset commodity trading activity to fully police conflicts of interest and deceptive trading practises impacting retail customers,” the CTFC chair explained.
Although the CFTC’s core responsibility is regulating the commodity derivatives market, Behnam said “there are several unique elements of the digital asset commodity cash market that distinguish it from other cash commodity markets, suggesting it would benefit greatly from CFTC oversight.”
The CFTC has been playing an active role in crypto supervision in recent years. Although the agency is far behind its sister agency, the Securities and Exchange Commission (SEC), in terms of the number of cases involving digital assets, it can show up a record of nearly 50 enforcement actions in the crypto space since 2014.
As the CFTC is increasing its efforts to counter the risks resulting from the booming digital asset market, Behnam told the senators the new challenges and the increasing attention by the CFTC “necessitates additional resources to adequately address these issues.”
