Financial Innovation Act was introduced in Congress as part of an effort to regulate the virtual asset sector. However, the Act did not see the light of day as it did not make it through the review process.
Two US Senators namely Cynthia Lummis and Kirsten Gillibrand are determined to revive the Static Act once again. The legislators in question are seeking to enforce clauses concerning consumer protection measures in the country that are part of the Act’s inherent fabric.
It is worth noting that Financial Innovation Act garners bipartisan status. It has made several appearances at a number of former Congressional sessions.
Various provisions of the bill are directed at reforming the regulatory authority and jurisdiction of the Securities and Exchange Commission as well as the Commodity and Futures Trading Commission. This bill can rearrange the direction of regulatory authority and oversight over the native crypto sector.
At present there is a regulatory war going on between major cryptocurrency enterprises and financial regulatory agencies in the USA. SEC has become the central figure during the last few months to bring various lawsuits against the biggest crypto enterprises in America including names like Coinbase and Binance.
However, various key figures and entities have raised questions concerning the legal jurisdiction of the SEC over cryptocurrency projects. There is a visible lack of regulatory oversight concerning the legal classification of cryptocurrencies.
The bill in question can provide greater clarity regarding the lawful authority and scope of the SEC and CFTC over the crypto sector. Financial Innovation Act made its first appearance in 2022 when crypto winter was in full bloom. To this end, this bill may also introduce safety measures and risk management for markets in the aftermath of bear cycles.
At the same time, this bill can introduce rules and guard rails for cryptocurrency entities that prevent the repetition of events like FTX collapse. Legislators drafted the bill as a result of Terraform’s collapse and de-pegging of its native stablecoin.
Heavily Politicized Crypto Sector May Benefit from Bipartisan Act
It is important to note that the crypto sector has been subjected to an authority struggle between SEC and CFTC. At the same time, the sector is also heavily politicized with various key political figures pledging for or against crypto promotion stances.
However, the bipartisan Financial Innovation Act may offset any biased implications on the sector and promote a more consumer-centric development. In the past, both SEC and CFTC have prosecuted different cryptocurrency products as unregistered securities or commodities in the absence of a proper regulatory framework for the asset class.
SEC has continued to quote Howey Test as the basis for declaring different cryptocurrencies as unregistered securities. However, legal experts have pointed out the subjective interpretation of the 1946 law as an insufficient basis for the classification of cryptocurrencies.
Meanwhile, Federal Reserve has nominated itself as the primary regulatory agency for stablecoin projects in the country. At present, there is a strong strain between crypto enterprises and American regulators regarding the matter of crypto regulations.
Many firms have expressed worries about moving to foreign territories citing regulatory uncertainty. Under this pretext, Financial Innovation Act is an effort for legislators to address the pressing matter.