Congress Considering New Blockchain, FinTech Legislation

Blockchain & E-Transactions Law

This term, Congress is set to consider several bills—each with bipartisan sponsorship—targeting the fields of blockchain, cryptocurrency, and fintech. This spurt of legislative activity indicates an increased awareness by lawmakers of both the opportunities for innovation in these fields and the potential pitfalls and risks for illicit use posed by these new technologies. The following are several of the bills that have been introduced this term to date which aim to promote blockchain and cryptocurrency:

  • The Blockchain Regulatory Certainty Act (H.R. 528), introduced in January 2019 by Representative Tom Emmer (R-MN), exempts from certain financial reporting and licensing requirements blockchain developers and providers of blockchain services as long as they do not, in the regular course of business, have control over digital currency to which a user is entitled under the blockchain service or the software created, maintained, or disseminated by the blockchain developer. The Act expressly preempts any inconsistent state law. This bill was first introduced by Rep. Emmer in 2018 as one of three bills aimed at growing the digital currency market.
  • The Virtual Currency Consumer Protection Act of 2019 (H.R. 922), introduced by Representative Darren Soto (D-FL), would require the Commodity Futures Trading Commission (“CFTC”), the SEC, and “other relevant Federal agencies” to coordinate a study and prepare a report within one year from the bill's enactment "to promote fair and transparent virtual currency markets by examining the potential for price manipulation," and to make recommendations on any needed legislative changes to prevent price manipulations of virtual currencies and to protect virtual currency investors from price manipulation. The legislation defines “virtual currency” as “a digital representation of value that does not have legal tender status and that functions as a medium of exchange, a unit of account, or a store of value.” Rep. Soto first introduced this bill in 2018. Soto stated that he seeks to promote blockchain technology as a driver of economic growth while protecting consumers and virtual currency investors.
  • The U.S. Virtual Currency Market and Regulatory Competitiveness Act of 2019 (H.R. 923), also introduced by Rep. Soto, would require the CFTC to coordinate a study and prepare a report on the state of virtual currency markets, both domestic and foreign, and provide recommendations for, among other things, how to promote American competitiveness in those markets and how to encourage the growth of the adoption of virtual currencies in areas of the commodity market that could benefit from it. The bill also seeks to clarify which virtual currencies qualify as commodities "for both existing currencies and ones that may be created in the future" and to provide an optional regulatory structure for virtual currency spot markets (i.e., exchanges). This bill was also first introduced by Rep. Soto in 2018.

Bills aimed at curbing the illicit uses of blockchain and fintech include The Financial Technology Protection Act (H.R. 56), which seeks to create an Independent Financial Technology Task Force to conduct research on terrorist and other illicit uses of new financial technologies and digital currencies and develop legislative and regulatory proposals to thwart these uses. Among other things, the Act proposes payment of a reward of up to $450,000 to any person who provides information leading to the conviction of an individual involved with the terrorist use of digital currencies. This bill has already passed the House and has been referred in the Senate.

The Homeland Security Assessment of Terrorists' Use of Virtual Currencies Act (H.R. 428) would require the Department of Homeland Security, within 120 days of the bill's enactment, to develop an assessment of threats posed by individuals using virtual currency to carry out activities in furtherance of acts of terrorism. This bill has already passed the House and has been referred in the Senate.

Finally, the Fight Illicit Networks and Detect Trafficking Act ("FIND Trafficking Act") would require the Comptroller General to conduct a study and report to Congress on how virtual currencies and online marketplaces are used to facilitate sex and drug trafficking. This legislation has companion bills in both the House (H.R. 502) and Senate (S. 410). The House bill has passed the House.

Given that each of these bills was introduced in a prior congressional session but were not passed by both houses, it will be interesting to see how many, if any of them, are actually enacted this session.

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