By: William Jackson
Cryptocurrency and blockchain technology had a big year in 2021. Bitcoin’s market value surpassed $1 trillion for the first time.[1] Non-fungible tokens went mainstream with a trading volume that exceeded $23 billion.[2] El Salvador accepted Bitcoin as legal tender, the first country in the world to do so.[3] On the other hand, hackers and scammers defrauded investors of over $7.7 billion over the course of the year.[4] Prices rose and fell at the whim of outspoken CEOs.[5] China banned the use of cryptocurrency and related activities.[6]
Despite all the hype and hesitance surrounding cryptocurrencies, Congress failed to pass any cryptocurrency or blockchain legislation in 2021 beyond some controversial crypto tax reporting language found in the Infrastructure Investment and Jobs Act.[7] Without formal guidance, regulators have struggled to comprehensively incorporate crypto into the existing regulatory framework.[8] However, the 117th Congress showed some progress, with lawmakers introducing a plethora of bills focused crypto and blockchain—thirty-five to be exact.[9] While some of these bills focus more generally on blockchain technology or monetary policy, many attempted to instate a formal cryptocurrency policy. It is worth considering these bills’ policies, popularity, and prospects to understand what crypto policy in the United States may look like by the end of 2022.
The first set of bills concerns crypto tax reporting, a concept currently governed by language found in the Infrastructure and Investment Jobs Act which was signed into law by President Biden on November 15, 2021.[10] This language basically confirms that crypto administrators–such as miners and software providers–must report digital asset transfers to the IRS.[11] Critics of this language argue it is too vague and propose amending it to be tailored more specifically for cryptocurrency administrators to follow.[12] The Keep Innovation in America Act, a bill introduced by Representative Patrick McHenry that garnered significant bipartisan support, would repeal the reporting provisions of the Infrastructure and Investment Jobs Act and institute new information and reporting requirements.[13]
Other bills introduced last year aim to study and potentially reign in methods by which blockchain technology can be used to defraud crypto investors. The Consumer Safety Technology Act, containing the Blockchain Innovation Act and portions of the Digital Taxonomy Act, would direct the Department of Commerce and Federal Trade Commission to collaborate on blockchain research regarding fraudulent practices and implement consumer safeguards based on their discoveries.[14] Other bills targeted ransomware more generally in response to persistent cyberattacks throughout the year, including attacks on crypto investors. These include the Ransom Disclosure Act, introduced by Senator Elizabeth Warren,[15] and the Sanctions and Stop Ransomware Act of 2021, introduced by Senator Marco Rubio.[16]
The remaining bills aim to move the United States towards a more comprehensive crypto regulatory framework. The Securities Clarity Act would provide some concrete guidelines for how the SEC can regulate cryptocurrencies.[17] The Token Taxonomy Act of 2021 would accomplish a similar goal.[18] As other countries move to incorporate cryptocurrencies into their economies, the U.S. Virtual Currency Market and Regulatory Competitiveness Act of 2021 would trigger studies to report on how the U.S. could stay competitive with them.[19]
Crypto and legislation seem naturally at odds, since the former moves at a breakneck pace, sometimes changing by the minute, while the latter can take years to develop. However, given the growing prominence of crypto in 2021 on the floor of Congress, more comprehensive legislation will likely find its way to the President’s desk by the end of the year.
[1] Taylor Locke, From Bitcoin Hitting $1 Trillion in Market Value to Elon Musk’s Dogecoin Tweets: 12 Key Crypto Moments from 2021, CNBC (Dec. 27, 2021, 2:58pm), https://www.cnbc.com/2021/12/27/12-key-moments-that-fueled-cryptos-record-growth-in-2021.html.
[2] Id.
[3] Id.; Jon Porter, El Salvador Becomes First Country to Adopt Bitcoin as an Official Currency, The Verge (Sep. 7, 2021, 4:58am), https://www.theverge.com/2021/9/7/22660457/el-salvador-bitcoin-legal-tender-currency-cryptocurrency-chivo-wallet.
[4] Locke, supra note 1.
[5] MacKenzie Sigalos, Dogecoin Plunges Nearly 30% during Elon Musk’s SNL Appearance, CNBC (May 9, 2021, 1:49pm), https://www.cnbc.com/2021/05/08/dogecoin-price-plummets-as-elon-musk-hosts-saturday-night-live-.html.
[6] Taylor Locke, China is Cracking Down on Crypto Again — Here’s What That Actually Means, and How it Affects U.S. Crypto Investors, CNBC (Sep. 24, 2021, 5:32pm), https://www.cnbc.com/2021/09/24/what-investors-should-know-about-chinas-cryptocurrency-crackdown.html.
[7] Jason Brett, In 2021, Congress Has Introduced 35 Bills Focused On U.S. Crypto Policy, Forbes (Dec. 27, 2021, 10:29pm), https://www.forbes.com/sites/jasonbrett/2021/12/27/in-2021-congress-has-introduced-35-bills-focused-on-us-crypto-policy/?sh=4b5ffb63c9e8; Roger M. Brown, Infrastructure Investment Act Expands Tax Reporting Obligations for Cryptocurrency Exchanges and Others, Chainalysis (Nov. 16, 2021), https://blog.chainalysis.com/reports/infrastructure-investment-act-tax-reporting-obligations-cryptocurrency/.
[8] See Keith Lewis, Ripple Case Seen as Precedent for Cryptocurrency Regulation, Roll Call (May 4, 2021, 7:00am), https://www.rollcall.com/2021/05/04/ripple-case-seen-as-precedent-for-cryptocurrency-regulation/.
[9] Brett, supra note 7.
[10] 26 U.S.C. § 6050I.
[11] Brown, supra note 7.
[12] Id.
[13] H.R. 6006, 117th Cong. (2021).
[14] H.R. 3723, 117th Cong. (2021).
[15] S. 2943, 117th Cong. (2021).
[16] S. 2666, 117th Cong. (2021).
[17] H.R. 4451, 117th Cong. (2021).
[18] H.R. 1628, 117th Cong. (2021).
[19] H.R. 5101, 117th Cong. (2021).
