The “Lummis-Gillibrand Responsible Financial Innovation Act” lays out a bold agenda for legal reform related to digital assets. Although a detailed summary of Bill is still forthcoming, here’s an abbreviated summary of 10 impactful provisions. For a more fulsome summary, see our full posting on the K&L Gates FinTech Law Blog.
- Applies generally to incorporated and licensed entities, but unincorporated DAOs, users of digital assets, and DeFi protocols would not be affected.
- Excludes a gain or loss of $200 or less in transactions for “goods or services” from gross income for federal income tax purposes.
- Requires regulated entities to make certain transaction-specific disclosures to consumers.
- Introduces the “ancillary asset” concept that splits the digital asset from any promises made in an investment contract, and delegates jurisdiction over ancillary assets to the CFTC.
- Authorizes spot crypto asset exchanges to register with the CFTC.
- Corrects the provision of the 2021 Infrastructure Investment and Jobs Act (HR 3684) that expanded the tax law definition of Broker to include any “person who… is responsible for … effectuating transfer of digital assets on behalf of another person.”
- Clarifies that staking proceeds are not a part of gross income until the taxpayer “exercises dominion” over them.
- Permits depository institutions to issue payment stablecoins subject to specific reserve and redemption requirements.
- Prohibits banks from using reputation risk in its examination ratings and requires appropriate reasons for requesting the termination of a customer account.
- Directs state regulators to adopt uniform money transmitter license requirements for digital asset transactions.
This Bill would radically change the way that regulated entities interact with digital assets in the U.S.. While the Bill is unlikely to pass this year, it is the product of significant bipartisan effort, and will likely lead to significant regulation of digital assets in the coming years.
Stay tuned for more in-depth coverage of the securities law and commodities law implications of amendments suggested in the Lummis-Gillibrand Bill.