The emerging asset class of cryptocurrency is new, unproven, not yet widely adopted, or even understood. It’s led to much confusion for investors especially when it comes to regulation and tax preparation.
However, a new cryptocurrency-focused bull currently in front of Congress will “fundamentally restructure the way the United States treats cryptocurrency,” by grouping assets into three distinct types.
Cryptocurrency Redefined: Commodity, Security, and Currency
This week, Congress has been reviewing the proposed Crypto-Currency Act of 2020 and discussing the details of how the bill will change the future of the asset class.
Related Reading | Is the Coronavirus The Black Swan Event That Crushes Cryptocurrency?
The founder and CEO of Metal Pay, Marshall Hayner, spoke in front of Congress regarding the bill he and Representative Paul Gosar worked tirelessly on, and later took to Twitter to reveal some important details about what the bill is proposing.
I had an incredible time introducing the Crypto-Currency Act of 2020 yesterday to Congress.
This Bill will fundamentally restructure the way that the United States treats cryptocurrency buy recognizing three distinct types of crypto. pic.twitter.com/eqZx8xmcUE
— Marshall Hayner (@MarshallHayner) March 10, 2020
Under the Crypto-Currency Act of 2020, the United States would recognize and classify crypto assets by three distinct types.
The first type of asset is “Crypto-Commodity” which is identified as “tradable, fungible, and digital assets” that exist on the blockchain representing contracts, utilities, and even real-world commodities.
Assets such as Bitcoin, Ethereum, and utility tokens would fall under such a category.
The second type of asset is “Crypto-Security” tokens, which are defined as an instrument existing on a blockchain network that is often tied to an external asset, such as a share of a company.
This category would contain assets issued on the blockchain that represent ownership of an external asset, such as the groundbreaking ERC-20 token issuance on the Ethereum blockchain this past week, where the tokens represent a portion of a $40 million investment made to Fatburger parent company Fat Brands.
The third and final type of assets, are “Crypto-Currency” tokens, which the Metal Pay founder says are stablecoins, designed to resistance money-laundering and counterfeiting, among other “common issues.”
Tether, USD Coin, Paxos Standard, the Gemini Dollar, and even Facebook’s Libra would fall into this category.
But Does This Bill Do More Harm Than Good?
However, the bill isn’t all positive for the space.
The Crypto-Currency Act of 2020 also proposes that any companies transacting with individuals related to cryptocurrencies will have their private and personal financial details and info shared with regulatory entities.
Beware of the “Crypto-Currency Act of 2020” or any kind of legislation which may force businesses to spy on, deanonymize, or micro-monitor customers.
This is an attack on financial privacy, which we will desperately need in the future to safeguard democratic rights and freedoms. pic.twitter.com/B9lDM8lxE4
— Alex Gladstein (@gladstein) March 10, 2020
Cryptocurrency wasn’t just built for digital, peer-to-peer transactions or wealth storage, the asset class was also designed to be censorship-resistant and ensure privacy in the digital era.
This bill essentially cripples this important benefit of cryptocurrencies for investors in the United States.
So while it does provide clarity on the different types of crypto assets, and less confusion is always a good thing, there may be better acts to follow – pun intended.