A landmark bill to create a regulatory framework guiding digital assets, including Bitcoin, was recently introduced in the U.S. Senate. 

The Responsible Financial Innovation Act (S.4356), co-sponsored by Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY), would, if passed, define what a digital asset is for the purposes of federal law and encourage digital asset innovation. With more Americans dipping into crypto investing, legislation like the Responsible Financial Innovation Act will support users seeking out financial freedom.

What Is Cryptocurrency? 

Cryptocurrency is a “digital or virtual currency that is secured by cryptography” that is extremely difficult to counterfeit or double-spend. Cryptocurrency is governed by “blockchain protocols, code, and communities govern cryptocurrency.”

Blockchain underpins digital assets like Bitcoin:

Blockchain networks are driven by systems of aligned incentives. A well-functioning public blockchain requires a community of users, node operators, developers, and miners, who all play roles in a mutually beneficial network ecosystem. For example: In many blockchain networks, rewards like newly minted cryptocurrency or transaction fees motivate network participants to compete to validate transactions and create new blocks. This incentive and validation structure also secures the network from criminal or fraudulent activity.

Today, there are reportedly 10,000 cryptocurrencies in circulation. 

What the Responsible Financial Innovation Act Proposes

The bill, as written, recommends that the two major types of cryptocurrency, Bitcoin (BTC) and Ether (ETH), be regulated as commodities under the Commodity Futures Trading Commission (CFTC). All other altcoins and tokens would fall under the purview of the U.S. Securities and Exchange Commission (SEC). 

“This bipartisan package, which would address CFTC and SEC jurisdiction, stablecoin requirements, and the treatment of digital assets for tax purposes, would ultimately generate more flexibility, innovation, consumer protections, and transparency while providing more certainty and clarity to the growing digital assets industry,” the senators wrote in a blog post.

Why the Biden Administration Wants to Regulate Digital Assets

Instead of leaning on the bill’s merits, the Biden administration already took sweeping action to deter the development and proliferation of digital assets. 

Notably, the March 2022 Executive Order on Ensuring Responsible Development of Digital Assets has six explicit goals including “consumer and investor protection,” “mitigation of illicit finance and national security risks” and “financial inclusion.” 

But the directive gives the federal government undue influence over digital assets. 

The directive reads, “The new and unique uses and functions that digital assets can facilitate may create additional economic and financial risks requiring an evolution to a regulatory approach that adequately addresses those risks.”

The Biden administration also expressed interest in creating a U.S. Central Bank Digital Currency (CBDC) “that is interoperable with CBDCs issued by other monetary authorities [and] could facilitate faster and lower-cost cross-border payments and potentially boost economic growth, support the continued centrality of the United States within the international financial system, and help to protect the unique role that the dollar plays in global finance.” 

CBDCs are “digital versions of existing fiat currencies” created by central banks.

In contrast with Bitcoin and Ethereum, which are decentralized, CBDCs are centralized and the preferred currency of governments—including the CCP.

Treasury Secretary Janet Yellin will consult other agencies leaders in crafting a CBDC report and must deliver it to President Biden by August. 

The Biden administration has aggressively targeted Bitcoin, for example, alleging its environmental footprint outweighs its utility as a currency. 

IWF Senior Policy Analyst Mandy Gunsakera has countered these claims and written extensively on Bitcoin mining’s benefits.

Bitcoin mining is no different, however, the network is by far more efficient and arguably has more social utility when compared to gaming for example. Globally, Bitcoin mining uses 188 terawatts of energy annually. While this number may sound extreme on first blush, it’s statistically insignificant accounting for only 0.122 percent of global energy consumption.



When compared to other extraction activities, such as gold mining, we see that Bitcoin mining uses only a third of the energy. Furthermore, the Bitcoin industry is consistently looking for ways to reduce energy consumption and integrate newer energy sources, including renewables. According to the Bitcoin Mining Council, 57 percent of its energy usage comes from renewable sources, which is the largest percentage of any other comparable industrial sector.

Crypto’s Popularity Explained

Despite industry layoffs stemming from recent crashes, cryptocurrency’s viability is still being lauded.

Jason Yanowitz, co-founder of Blockworks, told CNN crypto is naturally volatile, but can easily bounce back: 

Given how new crypto is (it started in 2009), said Yanowitz, it’s naturally more volatile. He points to Amazon (AMZN), whose stock price reached highs of $113 per share in the late 90s internet boom before crashing by 95% to $5.51. It closed Tuesday at $102.31, but before its 20-1 stock split went into effect June 6, it was trading well above $2,000 per share.

“I really disagree with the folks who say there’s no way to recover from something like this,” said Yanowitz. ‘” think people look at crypto and think it’s weird or that it’s not real. If you don’t think crypto is real you probably think it’s overvalued. But this drawdown isn’t nearly as bad as the last crypto bear market,” he added.

As of May 2022, Morning Consult reported 19% of Americans own some form of cryptocurrency—up from 16% in November 2021. 

Moreover, it’s estimated that virtual currencies and digital assets are currently valued at $1.2 trillion

Digital currencies aren’t disappearing anytime soon. The federal government’s response will reveal if they will help or hamper them. This Senate bill can serve as a regulatory framework that will clarify federal expectations without encroaching on Americans’ financial liberties.