New crypto bill just dropped

GM, and welcome to RollCall by Rollfi! 

Get caught up from the past week in 10 minutes or less:

• New bill just dropped 📜

• ETH Merge dress rehearsal 👗

• More from the week 🗞

New crypto legislation

"It's the wild west" is a phrase you hear a lot in the crypto space, largely because there has long been a lack of regulation. 

But on Tuesday, Senators Cynthia Lummis (R-WYO) and Kirsten Gillibrand (D-NY) released their long-awaited draft of a regulatory framework for digital assets that they've titled the Responsible Financial Innovation Act. The bill has been appointed to the Senate Committee on Finance as Bill 4356.

While the bill comes from a pair of Senators on either side of the aisle and from two states that have treated crypto very differently, it may still take a while to pass if it does at all. Issues include which agencies get jurisdiction of what assets, what the definitions of digital assets are, and getting members of Congress to agree on something.

Of note, the bill appoints spot market jurisdiction to the CFTC (Commodity Futures Trading Commission) as opposed to the SEC (Securities and Exchange Commission). Effectively what this means is the CFTC will oversee the crypto industry and most tokens will not have to register with the SEC as "securities".

So what else is in the bill?

Senator Gillibrand wrote this Medium post with the highlights. Here's some of the most notable items:

- Creating a workable tax structure. As we've mentioned in previous posts, crypto taxes are really confusing. This bill aims to create more clear definitions around how and when you get taxed. For example, mining and staking rewards would not be taxed until they are transferred into USD if this bill passes. Also, there would be an exemption for expenditures less than $200 worth of crypto, meaning you would not have to pay taxes on crypto spent under that threshold. Technically, the way this works now is that spending your crypto is equal to "selling" your crypto and creates a taxable event, even if its for $5.

- 100% Reserve requirement for stablecoins. This means that algorithmic stablecoins like UST would be outlawed and other stablecoin projects that are not fully backed would need to increase their reserves.

- Disclosure requirements for crypto projects and protocols. Digital asset issuers will have to be more clear about what they offer, the products they are selling, the associated risks, and their rights.

- Analysis on investing retirement savings. The bill would have the Government Accountability Office conduct an analysis on the opportunities and risks of adding digital assets to retirement portfolios.

All in, this is probably the most comprehensive and transformative piece of legislation to ever be proposed in the crypto world and is necessary for the continued growth of the industry.

Merge dress rehearsal

We've covered The Merge before here a couple times but we can't get over it.

Over the week, the Ethereum team successfully ran a test of the merge on one of their test networks called Ropsten, successfully transitioning it from a Proof-of-Work blockchain to a Proof-of-Stake blockchain.

If you need a refresh on what this means for ETH, Sassal sums it up nicely (not financial advice):

So what does the successful test mean?

This means that the timeline for the merge is still seemingly on track. There are several other tests to run before the mainnet transitions but we can seemingly expect it to happen later this summer.

For the devs here, Ethereum developer Danny Ryan posted this summary of issues that happened during the test merge:

More stuff from the week

• PayPal will now allow users to move crypto between wallets. This could be a major disruption for existing exchanges and wallets as PayPal is an already established major player in the fintech world.

• Coinbase employees have signed a petition to remove some senior executives amid declining stock prices. The post is called Operation Revive COIN.

• Mastercard added new partners to its NFT purchase scheme.

• $3.5B of VC money went to crypto startups in the month of May which, if you can believe it, is the lowest monthly total since October of last year. Also, 20 new crypto VC funds were launch in the month. (The Block)

Glossary

We're confused too, that's why we're here to help decrypt the crazy world of crypto.

• mining - Mining is the process by which networks of specialized computers generate and release new Bitcoin and verify new transactions. (Coinbase)

• staking - a way of earning rewards for holding certain cryptocurrencies and validating transactions (Coinbase)

• mainnet - the term used to describe when a blockchain protocol is fully developed and deployed (Binance)

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Disclaimer: Rollfi Inc does not guarantee and is in no way responsible for the accuracy of information provided in this message. All information is provided “AS IS” and with all faults. Data presented here may not reflect all activity in the market.