Crypto Logs: More Regulations Introduced, Few Materialized

10/27/22 | Roxanna Islam, CFA

Crypto regulation has been widely discussed as one of the necessary steps for the digital asset market to mature and become truly mainstream. According to a report by the Value Technology Foundation, over 50 bills have already been introduced addressing the crypto landscape. These bills address a range of topics including crypto taxation, central bank digital currencies, clarity on regulatory treatment of digital assets, blockchain technology, sanctions, and limitations on use of crypto by elected officials.

While mature industries often fear regulations because they believe they may stifle innovation, many crypto advocates are looking for regulation and guidance to support the newer digital asset industry. More clarity, regulation, and education could help provide investor protection particularly with the increased popularity of celebrity endorsements and release of new stable coins and alt coins (i.e., events like the Terra crash). Regulations could also help increase market stability, provide guidance for companies to innovate new products, and attract institutional investors who currently have regulatory hurdles or are still cautiously waiting in the sidelines.

Currently, only a few bills affecting digital assets have actually become law including the Infrastructure Investment and Jobs Act, which provides some guidelines for crypto tax reporting requirements. But the majority of crypto-related bills have only been introduced and have not yet been finalized.(1) While regulatory attention is a significant step, these bills will need to be passed before having a real impact on the industry. These are some of the bills in the pipeline:

Digital Taxonomy Act (H.R. 3638)

  • Introduced May 28, 2021
  • Directs the Federal Trade Commission (FTC) to transmit to Congress a report on the FTC’s actions related to digital tokens including addressing unfair or deceptive trade practices.

Digital Asset Market Structure and Investment Protection Act (H.R. 4741)

  • Introduced July 28, 2021
  • Provides regulation for digital assets. Grants the Commodities Futures Trading Commission (CFTC) authority over digital assets and grants the Securities and Exchange Commission (SEC) authority over digital asset securities.

Digital Commodity Exchange Act (H.R. 7614)

  • Introduced April 28, 2022
  • Provides for orderly and secure digital commodity exchange markets including conditions for sale of digital commodities and registration of exchanges.

Lummis-Gillibrand Responsible Financial Innovation Act (S. 4356)

  • Introduced June 7, 2022
  • Provides for responsible financial innovation and to bring digital assets into regulatory view.

Digital Commodities Consumer Protection Act of 2022 (H.R. 8950)

  • Introduced September 22, 2022
  • Amends the Commodity Exchange Act to provide the Commodities Futures Trading Commission (CFTC) jurisdiction to oversee the spot digital commodity market.

Bottom Line:

Because the crypto/digital asset market is still in its early stages, regulation is considered a positive for the industry and could stimulate further retail and institutional investor interest. There are increasingly more bills being introduced into Congress, but most of these have yet to materialize.

The Alerian Galaxy Global Cryptocurrency-Focused Blockchain Equity, Trusts and ETPs Index (CRYPTO) is the underlying index for the Invesco Alerian Galaxy Crypto Economy ETF (SATO). 

The Alerian Galaxy Global Blockchain Equity, Trusts and ETPs Index (BCHAIN) is the underlying index for the Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BLKC).

 

Related Research:

Crypto Logs: ETH Merge Has Minor Impact on BTC-Focused Equities

Crypto Logs: Two Questions on Correlation

Crypto Logs: Bitcoin ETFs vs. Index-Based Crypto ETFs

Crypto Logs: Looking Beyond Bitcoin into Crypto Equities

 

(1) All info from www.congress.gov