Under Trump, significant steps have already been taken towards crypto acceptance. Yet the bill currently circulating, the Clarity Act, could have an even greater impact. Financial expert Keith states that this law could give crypto a historic growth spurt.
Clarity Act ends gray area in crypto
The Clarity Act is described by YouTuber Keith as a historic turning point for the crypto sector. The law defines cryptoassets in a manner similar to how derivatives were placed into a regulated framework in 2000 through the Commodity Futures Modernization Act (CFMA).
What are derivatives?
Derivatives are financial contracts whose value is based on something else, such as a stock, commodity or Bitcoin (BTC). You can speculate on price movements without having to buy the asset yourself. With derivatives you can bet on a rising price (going long) or on a falling price (going short).
Among other things, the CFMA largely abolished supervision of derivatives trading, giving financial institutions free rein to trade complex products such as credit default swaps. By the way, it was precisely those ‘swaps’ that later played a leading role in the 2008 crisis.
After its introduction, the CFMA laid the foundation for a market that exploded from over 100,000 to more than 600,000 billion dollars. According to Keith, crypto may now enter a similar growth phase.
How exactly does the Clarity Act for crypto work?
The crypto sector operated in a legal gray zone for years, without clear rules or regulators. The Clarity Act changes this for the first time, with clear definitions and responsibilities for different types of crypto assets. That opens the door to integration with the traditional financial system.
Although the law is not yet final, the current proposal is to split digital assets into three main categories. ‘Digital commodities’ are tokens with a clear function within a blockchain, such as payments or network management, and are regulated by the Commodity Futures Trading Commission (CFTC).
‘Investment contract assets’ are tokens that are considered a security upon issuance, especially when linked to a company or investment structure; these are subject to supervision by the Securities and Exchange Commission (SEC), particularly in initial offerings.
Stablecoins are given a separate legal status and fall outside the traditional rules for securities or commodities.
An important element of the law is the introduction of the concept of ‘mature blockchain’. Once a blockchain is recognized as mature by the SEC, the associated token can no longer be labeled as a security. This means that many tokens can grow from a security to a commodity.
This is good news because tokens that are classified as commodities are subject to lighter regulation than securities. This makes them easier to trade, more attractive to investors and more accessible for innovation and use within the financial system.
Institutional adoption
According to Keith, the law ensures that institutional parties, such as banks and asset managers, finally have a clear legal framework to use crypto assets.
This development could lead to an explosive influx of capital into the market. Not only in crypto trading, but also in applications such as tokenization. This is the digital creation of assets such as shares or real estate that can be traded on the blockchain.
Other applications include stablecoins with interest and decentralized finance (DeFi) protocols that banks use in the background to make their services more efficient and modern.
DeFi also receives broad exemptions under the law, provided the protocol is demonstrably decentralized. This gives developers room to innovate without fear of legal prosecution.
Genius Act fuels stablecoin explosion
The Genius Act has already been passed and was signed into law in July. This law sets clear rules for stablecoins for the first time. It determines how these coins should be issued, covered and controlled, regardless of the rules for securities or commodities.
The impact is already visible. More and more companies are innovating with stablecoins. For example, earlier this month Visa established a global advisory department to help banks and companies with strategy, integration and use of stablecoins.
The American deposit insurance agency FDIC is also taking steps. As part of the implementation of the Genius Act, the regulator makes it possible for US banks to launch their own stablecoins. This is allowed through a separate subsidiary and under strict conditions.
Source: https://newsbit.nl/nieuwe-amerikaanse-wetgeving-opent-poort-voor-massale-crypt-adoptie/
