Crypto in your 401(k)? A grace period for crypto exchanges? There are bills for that.
(Kitco News) - Legislative activities related to cryptocurrencies in the U.S. are on the rise as the global push to establish a regulatory framework for crypto and launch central bank digital currencies (CBDC) continues to intensify.
In the U.S. Senate, a new bill has been introduced by Sen. Bill Hagerty (R-Tenn.) that proposes the creation of a safe harbor for cryptocurrency exchanges that might otherwise face legal ramifications for listing unregistered securities.
The text of the bill looks to establish a two-year grace period for crypto exchanges that would protect them from enforcement actions by the Securities and Exchange Commission (SEC) for listing tokens deemed to be unregistered securities by the regulating body. The beginning of the grace period starts once the commission makes an official determination that a token is considered unregistered security.
The bill also stipulates that exchanges will not be subject to legal action for failure to register as a broker-dealer or national securities exchange during the grace period.
Eventually, though, all exchanges listing tokens determined to be securities will be required to register as broker-dealers or national securities exchanges.
In the event that the bill becomes law, the SEC will still be able to label tokens as unregistered securities via rulemakings, statements and enforcement actions, but the Commodity Futures Trading Commission would have the right to object. Exchanges can also sue to appeal any decisions in court, where a judge would then be tasked with making a ruling on the security status.
The bill faces a tough road ahead; however, as a limited amount of time left in the current legislative session decreases the odds of its passage anytime soon.
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Cryptos in your 401(k)
A separate piece of legislation recently introduced by three congressional Republicans looks to broaden the type of investments that managers of 401(k)s and other defined contribution plans can make, including the ability to invest in digital assets.
Dubbed ‘The Retirement Savings Modernization Act’, the bill would also allow financial advisors to recommend cryptocurrencies, along with other traditional investment vehicles like private equity or hedge funds, without legal liability.
Outgoing Senate Banking Committee Ranking Member Pat Toomey (R-Pa.), Sen. Tim Scott (R-S.C.), and Rep. Peter Meijer (R-Mich.) are the sponsors of the bill. Statements given by the congressional members with the bill’s introduction cited inflation and “fiscal uncertainty” as the motivation for expanding retirement investment options.
Limitations on 401(k) investments were also criticized as reducing the overall returns compared to traditional pensions despite the fact that far more Americans rely on 401(k)s than traditional pensions for their retirement needs.
“Our legislation will provide the millions of American savers invested in defined contribution plans with the option to enhance their retirement savings through access to the same wide range of alternative assets currently available to savers with defined benefit pension plans," Senator Toomey said.
The fate of this bill, too, remains up in the air; however, as Toomey is not running for reelection and Meijer recently lost his primary election to the Republican challenger Jonh Gibbs. There is still the possibility that the bill could be inserted into a broader end-of-year tax bill, but that remains to be seen.