The Responsible Financial Innovation Act is sponsored by Republican Senator (Cynthia Lummis) and Democratic Senator Member (Kirsten Gillibrand) first proposed it on June 7, 2022, and later launched its updated version on July 12, 2023. Its main goals are to create a regulatory framework for digital assets, clarify the jurisdiction of the CFTC and SEC, resolve issues such as stablecoin issuance, digital asset taxation, protect consumers, and provide certainty and clarity to the industry.

The Responsible Financial Innovation Act was first proposed after the collapse of Terra, so the regulatory issues regarding stablecoins were emphasized in the bill, but the bill did not receive much support at the time. But after the FTX thunderstorm, sponsors Cynthia and Kirsten made significant changes to the bill. The revised bill places more emphasis on consumer protection and clarifies the regulatory status of the CFTC over the SEC.

To learn more about the story of FTX and SBF, please read: Who is SBF - From luxury yachts to silver bracelets and iron fences

Clear the jurisdiction of the CFTC and SEC

The The bill considers most digital currencies, including BTC and ETH, to be commodities rather than securities, and to be regulated by the CFTC. But when digital assets have characteristics similar to debt or equity, they are considered securities and are regulated by the SEC. Digital assets are considered securities when they meet any of the following conditions:

• Debt or equity
• Liquidation rights
• Right to receive interest or dividends
• Obtain profits or income derived solely from the management of others
• Any other economic interest in the enterprise

Under the Act, digital assets are considered Making a commodity does not require complete decentralization and can also be certified as a commodity.

Information Disclosure and Consumer Protection

After experiencing the storms of Terra, FTX and other institutions, the Responsible Finance Act places great emphasis on consumer protection. Protection, which imposes many requirements on information disclosure, reserve certificates, advertising standards and loan restrictions.

• Digital asset exchanges must register with the CFTC and comply with disclosure requirements.
• Issuers of digital assets are required to regularly disclose information to the SEC to demonstrate the commodity nature of the digital assets.
• Intermediaries need to disclose to users major changes in projects and operating methods, including asset custody, bankruptcy handling, fee structures, dispute resolution, etc.

Develop policies for the issuance of stablecoins

The bill imposes strict requirements on the issuance of stablecoins, which can only be issued by federal/state depository institutions , subject to federal/state regulatory agencies. In addition, issuers are required to maintain 100% high-quality asset reserves and publicly disclose the reserve assets supporting stablecoins and their values. At the same time, the bill proposes that algorithmic stablecoins should be regulated by the CFTC.

Adjusting Digital Currency Taxation

The bill clarifies the tax policy for digital assets and provides small tax benefits to cryptocurrency holders. Additionally, the bill also proposes tax accommodations for non-U.S. persons providing crypto services in the United States.