Crypto Update (June 2022)
Beyond falling prices and a dramatic turn of events for certain cryptocurrencies, other important developments have occurred for the industry over the past weeks. On June 7, 2022, for example, Senators Kirsten Gillibrand (D-N.Y.) and Cynthia Lummis (R-Wyo.) introduced bipartisan legislation (“Lummis-Gillibrand Bill”) aimed at increasing certainty in the crypto market by classifying cryptocurrencies as digital assets and placing these assets under the regulatory authority of the Commodity Futures Trading Commission (“CFTC”). This emerges around the same time that New York state legislators passed a bill to ban certain bitcoin mining operations that run primarily on carbon-based power sources.
The Lummis-Gillibrand Bill intends to encourage “financial innovation, flexibility, transparency, and robust consumer protections while integrating digital assets into existing law.” It designates digital currencies as “ancillary assets” and they will fall under the authority of the CFTC. Lummis and Gillibrand argue that this legislation is critical to keep consumers safe from bad actors while still promoting innovation. Giving authority to the CFTC has raised concerns for some who believe that the CFTC currently does not have the resources necessary to regulate crypto. However, Lummis and Gillibrand argue that the Bill will empower the CFTC and that adequate resources for regulation ultimately will not be a problem.
Unlike the Lummis-Gillibrand Bill, which broadly seeks to regulate crypto as an asset, the New York Legislature passed a bill seeking to curb greenhouse-gas emissions from crypto-mining. If signed into law, the bill would impose a two-year moratorium on permits for new, expanded, or renewed cryptocurrency mining operations that use proof-of-work to authenticate blockchain transactions, unless those operations use 100% renewable energy. With growing criticism of greenhouse-gas emissions associated with proof-of-work crypto-mining, other states may follow New York’s effort and adopt similar legislation.
If you have any questions about either of these legislative developments, please contact Jared Wigginton at jared@goodstewardlegal.com.
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