‘Bitcoin Senator’ Lummis says her cryptocurrency account leaves most of SEC supervision intact
by Arthur · July 5, 2022
When Senator Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) introduced their bipartisan Act on Responsible Financial Innovation In early June, it was widely seen as a policy that would undermine US Securities and Exchange Commission jurisdiction over crypto.
But Lummis does not believe that the SEC will lose much of an overview of its proposed crypto-regulatory framework.
“I really do not think the SEC is going to lose regulatory control, I think they will keep it when [the digital assets] are investment contracts, “she said Decrypt on the last episode of the gm podcast. “I think you want situations, under our definitions of ancillary assets, where you want a digital asset, such as Bitcoin, which is the underlying asset that is regulated by the CFTC, but the investment contract it is contained in is itself regulated by the SEC.”
The bill’s investment contract definition, in itself taken from the Securities Act of 1933, would leave the CFTC to regulate Bitcoin and Ethereum. The SEC will oversee the vehicles to invest in these assets, like all exchange traded funds (ETFs).
Citing the ’33 Act in the bill is a significant detail. It is widely believed to be the most viable way forward for a Bitcoin spot ETF.
The SEC has already approved several Bitcoin futures ETFs under the Investment Companies Act of 1940, saying it offers certain investor protections not covered by the 1933 Act. But when the commission approved the Teucrium Bitcoin Futures Fund under the ’33 Act in April, it renewed hope about a spot ETF.
Grayscale CEO Michael Sonnenshein moved quickly and wrote one long Twitter thread to do its part to turn the firm’s Grayscale Bitcoin Trust (GBTC) into a Bitcoin spot ETF. And when it looked like the SEC could reject the application, Grayscale approached the crypto community for support and got the legal team to try to influence the commission.
It still did not work. When the SEC rejected the application last week, Grayscale sued.
There is no guarantee, of course, that the GBTC conversion will sail through under Lummis’ regulations. But that would set a precedent for creating crypto-ETFs under the ’33 law. It would provide some clarity to the current cryptoregulatory climate, which Lummis compared to stumbling around in the dark and stumping your toe.
“If you walk around in the dark, when it comes to regulation, and your first blow to a regulatory body is to be hit with an enforcement action, it’s like sticking your toe very hard in the middle of the night – or maybe breaking your toe in the middle of the night,” she told Decrypt. “It leaves a bitter taste in people’s mouths.”
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