Amid crypto turmoil, senators propose sweeping oversight

Sen. Cynthia Lummis talks in a meeting.
Sen. Cynthia Lummis (R-Wyo.) has proposed legislation that would regulate cryptocurrencies.
(Mariam Zuhaib / Associated Press)

Wide-ranging bipartisan legislation unveiled Tuesday would regulate cryptocurrencies and other digital assets after a series of high-profile busts and failures.

It’s unclear, though, whether the bill proposed by Sens. Kirsten Gillibrand (D-N.Y.) and Cynthia Lummis (R-Wyo.) can clear Congress, especially at a time of heightened partisanship ahead of the midterm elections. The bill also comes as cryptocurrency advocates have become bigger — and more free-spending — players in Washington.

The bill, called the Responsible Financial Innovation Act, proposes legal definitions of digital assets and virtual currencies; would require the Internal Revenue Service to adopt guidance on merchant acceptance of digital assets and charitable contributions; and would make a distinction between digital assets that are commodities or securities, which has not been done.


The bill “creates regulatory clarity for agencies charged with supervising digital asset markets, provides a strong, tailored regulatory framework for stablecoins, and integrates digital assets into our existing tax and banking laws,” Lummis said in an emailed statement. Stablecoins are a type of cryptocurrency pegged to a specific value, usually the U.S. dollar, another currency or gold.

Lummis has been a vocal advocate for cryptocurrency development and has invested between $150,002 and $350,000 in bitcoin, according to her financial disclosure.

The legislation imposes disclosure requirements on digital asset firms to ensure that consumers can make informed decisions, delineates agency responsibilities over various digital assets — such as Commodity Futures Trading Commission jurisdiction over bitcoin — and requires a study on digital asset energy consumption, among many other proposals.

The bill comes at a tumultuous time for cryptocurrencies, including the May meltdown of the terraUSD stablecoin and the luna coin, which traded at a value of less than one ten-thousandth of 1 cent.

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Gillibrand said the bill establishes “a regulatory framework that spurs innovation, develops clear standards, defines appropriate jurisdictional boundaries and protects consumers.”

These developments have prompted lawmakers on both sides of the aisle to support legislation that more closely scrutinizes digital assets.


And crypto lobbying has followed suit. This year, for the first time, industry executives have flooded money into congressional races, spending $20 million, according to records and interviews.

Cryptocurrencies have their supporters in Congress. Sen. Cory Booker (D-N.J.) said at the DC Blockchain Summit in Washington last month that he is drawn to “the exciting potential democratizing effect that can come from creating wider pathways of opportunity for marginalized communities.”

Despite the risks, about 16% of adult Americans, or 40 million people, have invested in cryptocurrencies, according to a September 2021 Pew Research Center poll. And 43% of men ages 18 to 29 have put money into cryptocurrency.

Black Americans are also more likely to invest in cryptocurrencies than white Americans.

President Biden signed an executive order in March urging the Federal Reserve to explore whether the central bank should create its own digital currency and directing federal agencies, including the Treasury Department, to study the effects of cryptocurrencies on financial stability and national security.

Treasury Secretary Janet L. Yellen said in an April speech at American University that more government regulation is needed to police the proliferation of cryptocurrencies and ward off fraudulent or illicit transactions.

“We have a strong interest in ensuring that innovation does not lead to a fragmentation in international payment architectures,” she said, adding that the Treasury Department will work with the White House and other agencies to develop reports and recommendations on digital currencies.


Associated Press writer Ken Sweet contributed to this report.