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Senators Suggest Oversight In The Midst Of The Cryptocurrency Crisis

Gradually, then all at once, like with so many things. Take bitcoin, the first cryptocurrency, which accounts for almost a third of the market’s value. Since the end of March, the price of a single bitcoin has been steadily declining, indicating a broader malaise in the technology sector.

That makes sense: buying bitcoin is, in some ways, a wager on the likelihood of more technological disruption, just like buying any other technology stock. With inflation cutting down post-pandemic growth on both sides of the Atlantic, and a nagging feeling that excessive optimism had led to an overrating of IT in general in recent years, the entire sector began to fall.

The DAM finally burst in early May. It fell more in a week than it had in the previous month. Contagion from the disastrous failure of another cryptocurrency project, Terra, which was originally valued at more than $50 billion but finished the week practically worthless.
Other coins followed Terra’s demise. Investors feared that similar ventures would follow; eventually, panic overtook the larger sector, and even comparatively blue-chip tokens, such as bitcoin itself, fell.

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The crisis didn’t end until mid-May, and while the market has restored some stability, it shows no signs of rebounding to its previous month’s highs. According to one chief executive, we may be entering a “crypto winter.” And that’s the upbeat view from within the industry; pessimists believe this is the start of the decline.

Senators Suggest Oversight In The Midst Of The Cryptocurrency Crisis

Cryptocurrency Crisis

After a succession of high-profile arrests and failures, bipartisan legislation was announced Tuesday that would govern cryptocurrency and other digital assets.

However, it’s unclear if the plan presented by Senators Kirsten Gillibrand (D-NY) and Cynthia Lummis (R-Wyo.) would pass Congress, especially given the increased partisanship in the run-up to the midterm elections. The law also comes as proponents of bitcoin have grown in power — and in spending power — in Washington.

The Responsible Financial Innovation Act proposes legal definitions of digital products and digital currencies, as well as requires the IRS to issue guidance on merchant acceptance of digital assets and charity donations, which has yet to be done. It also makes the distinction between digital assets that are necessities versus digital assets that are investment vehicles, which has yet to be done.

Lummis said in an email interview that the bill “generates regulatory clarity for authorities entrusted with overseeing digital asset markets, offers a solid, specialized regulatory regime for stablecoins, and incorporates digital assets into our current tax and banking legislation.” Stablecoins are a sort of cryptocurrency that is linked to a fixed value, such as the US dollar, other currency, or gold.

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Lummis has been an outspoken proponent of cryptocurrency development, and according to her financial report, she has contributed between $150,002 and $350,000 in bitcoin.
The bill, among other things, imposes disclosure rules on digital asset firms to ensure that the customers can make better decisions, and define agency obligations over various digital assets — like the Commodity Futures Trading Commission’s jurisdiction over bitcoin — and mandates research on digital asset energy usage. The bill comes at a challenging time for cryptocurrencies, following the May breakdown of the terra USD stablecoin and luna, a currency used to purchase and sell assets that went for less than a tenth of a cent.

“A regulatory structure that stimulates innovation provides clear standards, specifies appropriate jurisdictional borders, and protects consumers,” Gillibrand said of the bill. As a result of these changes, legislators on both sides of the aisle are supporting legislation that scrutinizes digital assets more rigorously. Lobbying for cryptocurrency has followed suit. As per statistics and interviews, industry leaders have poured $20 million into congressional elections last year for the first time.

Cryptocurrencies have advocates in the United States Congress. Sen. Cory Booker, D-N.J., expressed his interest in “the wonderful possibility democratizing impact that can come from opening greater routes of access for underprivileged populations” during the DC Blockchain Summit in Washington last month.

Despite the hazards, per a Pew Research Center research from September 2021, around 16 percent of adult Americans, or 40 million people, have invested in cryptocurrency. And 43% of guys aged 18 to 29 had invested in cryptocurrency. African Americans are likewise more inclined than whites to engage in cryptocurrency.

In March, President Joe Biden signed an executive order directing government agencies, such as the Treasury Department, to evaluate the implications of bitcoin on financial stability and national security.

Cryptocurrency Crisis

More governmental regulation is necessary to regulate the proliferation of cryptocurrency and prevent fraudulent or unlawful transactions, according to Treasury Secretary Janet Yellen, who spoke at American University in April. “We have a significant interest in ensuring that innovation does not lead to duplication in international payment infrastructures,” she said, noting that the Treasury Department will collaborate with the White House and other departments on digital currency analysis and recommendations.

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