Congress Introduces A Game

06/05 update below. This post was originally published on June 3

Bitcoin BTC and ethereum—as well as rival top five cryptocurrencies Ripple's XRP XRP and Binance's BNB BNB —have rocketed this year, adding $350 billion to the crypto market in 2023 (triggering a flood of bullish predictions).

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The bitcoin price dropped back last month from its 2023 peak of just over $30,000, dragging on the ethereum price as well as XRP and BNB, even as Goldman Sachs and Microsoft quietly lay the groundwork for the next bull run.

Now, amid fears a crypto "powder keg" could be about to ignite, U.S. lawmakers have proposed a "functional framework" aimed at providing regulatory clarity for bitcoin and crypto companies in the country.

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U.S. lawmakers have introduced a bill to Congress that proposes a clearer delineation of authority ... [+] between regulators on cryptocurrencies including bitcoin, ethereum, BNB and XRP.

The 162-page draft bill, unveiled by House financial services committee chair Patrick McHenry, a Republican from North Carolina, and House agriculture committee chair Glenn Thompson, a Republican from Pennsylvania, is an attempt to kickstart discussions between Republicans and Democrats on the two committees, Bloomberg reported.

In recent weeks, some of the largest U.S. bitcoin and crypto companies have warned the country is falling behind the rest of the world on crypto legislation, with Hong Kong's new regulatory regime coming into force this week alongside the Europe Union's landmark markets in crypto assets (MiCA) regulation being signed into law.

Major crypto exchanges, including the Nasdaq-listed Coinbase, have been feuding with regulators over whether certain cryptocurrencies are being sold and traded as unregistered securities. In late 2020, the U.S. Securities and Exchange Commission (SEC) sued Ripple, accusing the company of selling $1.3 billion in unregistered securities via its XRP cryptocurrency (Ripple's chief executive has recently said he's "confident" of an imminent outcome).

06/05 update: The new draft crypto bill comes amid growing fears in the crypto industry that the U.S. government and regulators are involved in a concerted effort to de-platform crypto from the banking system as "operation choke point 2.0"—a reference to a 2013 U.S. Department of Justice policy to lock industries thought to be high risk for fraud and money laundering out of the banking system.

"In the U.S., we know it's coordinated," Nic Carter, an investor with Castle Island Ventures who coined the term operation choke point 2.0, told the What Bitcoin Did podcast. "We absolutely know that. It's certain officials in the Biden administration that are working together with specific regulators, in particular the bank regulators, to marginalize the bitcoin and crypto industry."

Carter warned that the Biden administration and regulators' hostility to the crypto industry has grown in the aftermath of the FTX meltdown last year and played a part in the collapse of crypto-friendly banks Signature and Silvergate earlier this year.

The new U.S. crypto bill—after several attempts to pass crypto legislation in previous sessions—proposes cryptocurrencies offered as part of an investment contract would fall under SEC oversight, while those that qualify as commodities would be overseen by the Commodity Futures Trading Commission (CFTC).

Whether cryptocurrencies such as bitcoin, ethereum, Binance's BNB or Ripple's XRP are defined as securities or commodities would depend on how decentralized their underlying blockchain is, decided by an SEC ruling.

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The bitcoin price has roared back in 2023 following last year's sudden crash that wiped $2 trillion ... [+] from the combined price of ethereum, Binance's BNB, Ripple's XRP and the wider crypto market.

The bill was cheered by some in the bitcoin and crypto industry ahead of a House agriculture committee hearing on digital asset regulation scheduled for June 6.

The bill "lays a strong foundation for regulatory jurisdiction and definitions," Paul Grewal, the chief legal officer at bitcoin and crypto exchange Coinbase, posted to Twitter. "A comprehensive bill of this magnitude warrants an in-depth review, which we’ll be conducting over the coming days, but what we’re seeing so far is encouraging."

"It's a win this year for crypto to even get some attention in DC right now, after last year's setbacks," Ryan Selkis, founder at crypto data company Messari, posted to Twitter, adding: "There is still a lot of work to do to get to a viable piece of legislation, but this is a good starting point for a sensible market structure bill."