Proposed U.S. Crypto Regulation Could be a Long-term Positive for the Industry says Analyst

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This week has seen the release of a proposed crypto asset regulatory bill in the U.S. which promises some far reaching implications for the industry.

The bill is described by its authors as a “landmark bipartisan legislation that will create a complete regulatory framework for digital assets that encourages responsible financial innovation, flexibility, transparency and robust consumer protections while integrating digital assets into existing law.”

While this bill will undoubtedly undergo significant amendments even if it ultimately is passed as a law, Matt Weller, Global Head of Research for FOREX.com, says there are some notable takeaways for crypto traders.

The most important being that most legitimate crypto development teams have been pleading for the U.S. to develop such a comprehensive regulatory framework for years so they know the proverbial "lay of the land".

"The passage of any of bill could be a long-term positive for the industry," says Weller.

The bill comes in the wake of the implosion of Luna and the stable coin TerraUSD last month which shook confidence in the industry.

Naga - the ios crypto wallet provider - says Luna now stands at $0.001592, a figure over 15,000% from its low, but far below its value at the beginning of May which was around $80.

In a move that should restore battered confidence in stable coins in the wake of Terra's implosion, the proposed bill advocates for “100% reserve, asset type and detailed disclosure requirements for all payment stablecoin issuers.”

"It provides clear definitions of crypto securities and commodities, allowing issuers to determine in advance how new tokens would be regulated rather than fearing retroactive enforcement actions," says Weller.

He adds much of the regulatory enforcement under the new bill would fall on the CFTC, which is tasked with regulating commodities and futures.

As such most of the biggest tokens in the cryptoasset space, including Bitcoin and Ethereum, will be defined as “ancillary assets” and overseen by the CFTC.

The bill would make sub-$200 purchases using cryptoassets tax-free, reducing the tax reporting burden on many small-scale crypto users.

"Ultimately, with Congress on track for its usual August recess and mid-term elections set for November, we’re unlikely to see any major movement toward passage of the bill until next year at the earliest, so the immediate trading implications may be limited," says Weller.