The Most Important Crypto Bills in Front of Congress

Chuckles Freely

A handful of bills currently in the halls of Congress might finally bring long-awaited regulatory clarity for Bitcoin and other cryptos.
Lack of regulation is holding back the benefits of Bitcoin and other cryptosPhoto byEwan Kennedy on Unsplash

The crypto community has had a rough few years. With major collapses like Samuel Bankman-Fried’s FTX and Do Kwon’s Terraform Labs, the US Securities and Exchange Committee (SEC) suing Ripple, Coinbase, and Binance, and a seemingly never-ending slew of failed projects/outright scams like Logan Paul’s CryptoZoo, the future of crypto is on rocky footing. The price of Bitcoin hit its all-time high of $67,567 in November 2021, and today it languishes below $30,000. Though some predict prices far higher in the near future, many would-be investors are afraid to enter the market.

The main problem is the lack of US regulatory clarity. Some countries have banned crypto, some have made Bitcoin the official currency, others prohibit banks from getting involved, and some have specific rules for mining, how exchanges operate, what constitutes a taxable event, etc. Whether or not these laws from around the world make sense or foster crypto use and innovation, they help anyone operating in the crypto-sphere understand what is permitted and what is not. In the US, though, legislators have been dragging their feet, creating confusion for all industry participants.

With any luck, a handful of bills sitting before Congress might finally create the necessary laws for crypto to grow up.

HR 4763: Financial Innovation and Technology for the 21st Century Act

On July 20th, 2023, Pennsylvanian Republican representative Glenn Thompson introduced House Resolution 4763. It’s detailed, it’s extensive, and it’s going to prevent a lot of headaches. Among the many aspects of this massive proposal, it aims to:

  1. Create comprehensive and usable definitions of cryptocurrencies and other entities that use or interact with them, such as exchanges, developers, wallets, custody/staking providers, etc.
  2. Differentiate between digital commodities and securities.
  3. Clearly split responsibilities between the SEC and the Commodity Futures Trading Commission (CFTC).
  4. Determine a path to registration and compliance.
  5. Create an SEC-CFTC joint task force to research and provide advice on digital assets, decentralized finance, NFTs, etc.

All 5 of these are sorely needed. In the last few years, the SEC has unleashed a flurry of lawsuits in a misguided attempt to punish bad actors and stop the Wild West-style behaviors that permeate the industry. Many of these lawsuits claim certain coins and tokens are securities and those that sell them are unregistered brokers. Under Jay Clayton, the SEC sued Ripple, for selling XRP, which they claimed was an unregistered security. Though the SEC recently partially lost this case, they still have a long list of similar lawsuits in the works with others. In fact, the SEC has claimed that all cryptos besides Bitcoin and Ethereum are securities, despite the fact that most do not satisfy the four elements of the Howey Test.

The Howey Test comes from the 1946 Supreme Court case SEC v. W.J. Howey Co., which determined the rules for what qualifies as a security or investment contract: 1. an investment of money, 2. a common enterprise, 3. an expectation of profit, 4. a reliance on the actions of others. The clearest example of a security is corporate stock. An investor buys the stock with the expectation of making money, either from receiving a share of profits or the stock appreciating, due to the actions of management and employees.

However, when it comes to crypto, the Howey Test is not so easily applied. Bitcoin is clearly not a common enterprise due to decentralization. An investor cannot reasonably expect a profit due to the actions of an organization or individuals. XRP was questioned due to a large chunk of it being owned by Ripple and its founders, as well as the fact that the company uses it in its services: cross-border payments, crypto liquidity, and central bank digital currencies (CBDCs). Fortunately for XRP holders and the rest of crypto, Judge Torres ruled that the 4 prongs of the Howey Test were not sufficiently met in secondary market sales to label it a security. So far, only BTC, ETH, and now XRP (when sold on a secondary market) have the official non-security stamp, though this could change through appeal.

Complicating issues, though, a Manhattan judge officially disputed the SEC v. Ripple verdict. In particular, Judge Rakoff does not differentiate between different methods of sale, in that XRP being sold on secondary markets or directly to institutional investors is irrelevant. If this opinion stands, it could lead most other coins to be labeled securities, making them difficult to transact, effectively kicking the legs out from under the entire industry. However, even Judge Rakoff acknowledges that the law is confusing and needs to be cleared up by common sense, easy-to-understand legislation, such as HR 4763.

The SEC has also torpedoed the crypto industry with their seemingly capricious approval or rejection of exchange-traded funds (ETFs). An ETF functions somewhat like a mutual fund, which tracks particular assets like gold or silver or a group of assets like the S&P 500. Crypto ETFs are designed to track the price of Bitcoin or a specifically chosen collection of other coins. These already exist and are quite popular in Canada and Latin America, though they have struggled to find approval in the US. The SEC has a 100% rejection rate. Why? Because they claim they do not adequately protect investors from fraud.

"Firms have been applying for spot bitcoin ETFs for more than two years, but so far, the SEC has denied more than 30 proposals since 2021 — a 100% rejection rate."

Sigalos & Macheel, CNBC

Again, the SEC's actions lack detail or regulatory footing. Thankfully, the US Court of Appeals for the D.C. Circuit agrees with this sentiment, as they ruled in favor of Grayscale on August 29th, 2023. In 2022, Grayscale sued the SEC for rejecting its ETF application, not providing sufficient explanation for doing so, and not providing a clear path for compliance and approval. The judge in the case claimed that the SEC's actions not only agreed with these assertions but might have been illegal. This decision is thought to make it far more likely for other companies, such as Blackrock and Fidelity, to have their ETF applications approved in the near future.

If HR 4763 passes, all of the examples above and many others of the SEC running amuck would be cleared up. The SEC would be able to go after actual fraudsters, provide clear guidance for crypto firms, and protect investors, as is their stated purpose.

HR 1747: Blockchain Regulatory Certainty Act

Some crypto naysayers paint it as an enabler of money laundering, which of course is true to a certain extent. According to Chainalysis, the amount of ill-gotten money being sent through crypto has been steadily rising since they began tracking it in 2015. In 2022, criminals sent nearly $24 billion in various digital assets to hide the source and recipient of the funds. This is done by using privacy coins, a multitude of wallets and transactions small enough to fly below the radar, and mixers. Crypto mixers function by pooling crypto funds with other users, converting the funds to other coins or tokens, transferring the funds to other wallets, and redistributing the washed funds back to the original users. For a nominal fee, users can make their crypto essentially untrackable, creating a black hole for authorities interested in doing so. The US Treasury has accused the most high-profile crypto mixer, Tornado Cash, of helping to launder some $7 billion. Naturally, Tornado Cash has been banned in the US, and the founders, Alexey Pertsev, Roman Storm, and Roman Semenov, were arrested and indicted. Binance, the largest crypto exchange in the world, is also being investigated for money laundering in France.

Because of crypto's money laundering problem, US regulators are struggling to understand how to create legislation for the many different types of crypto services. Some sitting politicians, such as Massachusetts Senator Elizabeth Warren, want to take broad, not-so-nuanced action against the entire crypto industry. In particular, Warren wants to bring all crypto companies under the umbrella of the Bank Secrecy Act. Put into law in 1970, the Bank Secrecy Act (BSA) requires financial institutions to help authorities tackle money laundering by keeping records of cash transactions, reporting deposits of $10,000 or more, and identifying suspicious activity. When it comes to crypto, few are arguing against exchanges being subject to the BSA, as these are the off-ramp back into traditional, fiat currency.

However, there is significant debate over the many other types of crypto services. To help end the debate and bring much-needed regulation, Republican Representative Tom Emmer from Minnesota introduced the “Blockchain Regulatory Certainty Act” on 3/23/2023. It's relatively short and simple. It states that crypto services are exempt from the same rules overseeing financial institutions and money transmitters unless they take control of customer funds.

"This bill exempts from certain financial reporting and licensing requirements blockchain developers and providers of blockchain services that do not take control of consumer funds."

HR 1747

If this bill passes, it would accomplish 2 things. First, this would free most crypto services from unnecessary and overbearing regulations. Second, it would force any entity with customer funds to protect those funds in much the same way a bank does.

HR 4766: Clarity for Payment Stablecoins Act of 2023

Anyone following crypto has likely heard about stablecoins. To facilitate trading between different cryptos or between crypto and fiat, stablecoins maintain a consistent value of $1, with minor fluctuations. They do this through algorithmic trading and/or maintaining reserve assets. Ostensibly, these should be a point of stability in an otherwise volatile market. However, lack of regulation has led to fraud, manipulation, and chaos.

On May 7th, 2022, stablecoin UST became unpegged from $1, and two days later plunged to $.35. The slide continued rapidly, leaving the once popular stablecoin near $.015, at the time of this writing, a total loss of $18 billion. LUNA, an asset connected to UST, fell from over $100 to now $.000065. The collapse is attributed to the misdeeds of Do Kwon the owner of the managing company, Terraform Labs, and the possibly-coordinated actions of large holders of the assets in question. Do Kwon has been arrested and faces charges in both Japan and the US.

USDT, the stablecoin with by far the largest market capitalization, roughly $80 billion, has been under suspicion for years. Owned by Taiwan-based Tether, the stablecoin is thought to not have sufficient reserves backing it up. In an attestation, the owners claimed USDT is backed 1 to 1 with USD and other assets, yet they have yet to release an audit showing proof of reserves. In fact, the closest they've gotten to releasing an audit is hiring Friedman LLP to perform one, but they quit without finishing. Making matters worse is the fact that they've been fined numerous times by the SEC and the CFTC for outright lying or misleading investors, and the founders are under investigation by the Department of Justice for bank fraud. The icing on the cake is that finding information on CEO Jan Ludovicus van der Velde is surprisingly hard to do.

While there are numerous stablecoins with better reputations, crypto is in need of tighter and smarter regulations surrounding them. To reign in the chaos, North Carolina's Patrick T. Henry introduced the "Clarity for Payment Stablecoins Act of 2023" on 7/20/2023. The bill's key provisions are the need for stablecoin issuers to

  1. Keep sufficient reserves
  2. Regularly prove reserves
  3. Have clear rules for redeeming reserves
  4. Be part of an insured, federal or state-qualified institution

"Permitted issuers must be a subsidiary of an insured depository institution, a federal-qualified nonbank payment stablecoin issuer, or a state-qualified payment stablecoin issuer."

HR 4766

With this type of oversight, investors would have far more certainty in stablecoins doing what they are supposed to: provide stability, something the crypto market has a strong reputation for not having.

HR 4841: Keep Your Coins Act of 2023

Introduced by Representative Warren Davidson on 7/25/2023, the "Keep Your Coins Act of 2023" is short and to the point. It states that no federal institution can outlaw the storage or use of virtual currencies "to purchase goods or services for the person’s own use, and for other purposes." The power of this bill is its vagueness: You just can't ban crypto, so don't even try. It's hard to say if the US government would ever try a blanket ban on crypto, but given the precedent set by other nations, it's not out of the realm of possibilities.

These countries have placed absolute bans on crypto: Qatar, China, and Saudi Arabia. The countries with limited bans or severe restrictions are Russia, Algeria, Bolivia, Bangladesh, Egypt, Colombia, Ghana, Indonesia, Lesotho, Gabon, Libya, Guyana, Zimbabwe, Liberia, Cameroon, Iran, India, Vietnam, Turkey, Nepal, North Macedonia, Mexico, Iraq, and Kosovo. On the other side, only 1 nation has officially embraced crypto: El Salvador. In 2021, President Nayib Bukele enthusiastically embraced Bitcoin as official tender to help bank the unbanked (2/3 of the population) and give the country more economic freedom in the global financial system. The Central African Republic tried this maneuver in April 2022, though it was repealed a year later due to significant backlash.

Such a bill might be unnecessary, but given crypto's outspoken opponents in both the House and Senate, it's better to be safe than sorry. For example, Senator Warren was described as building a bipartisan "anti-crypto army," according to Politico. Her initiative has slowed due to pro-crypto legislators and lobbyists, though HR 4841 would provide a bulwark in case the tide turns.


The crypto-verse is rife with problems, from goofy and pointless NFTs to historic levels of fraud. Individual and institutional investors are skittish, as they've seen massive organizations and friends or family lose uncomfortable amounts of money for one reason or another. It's time the US government got the lead out. Legislation like the bills discussed above is a step in the right direction, though they may not actually become law. At the moment, the bills are caught in the Committee on Financial Services (HR 4763 is also caught in the Committee on Agriculture for some reason) and have yet to be brought before the House of Representatives for a formal vote.

If you care about crypto and its many legitimate uses, call your representatives and voice your opinion on these bills.

Originally published at on August 31, 2023

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Politics and science writer at The Happy Neuron

New York, NY

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