Senators Kirsten Gillibrand and Cynthia Lummi have introduced a bipartisan crypto regulation bill that seeks to bring structure and oversight to the fledgling industry. Crypto has been struggling in 2022, with many investors dropping the volatile and speculative asset in favor of more tried-and-true investments. Bitcoin is now trading for just under $30,000 per coin, despite hitting a high water mark of $69,000 just a few months ago.
The bill that Senators Gillibrand and Lummi have proposed would categorize crypto assets as commodities, like orange juice or wheat. This would allow existing government agencies to oversee the exchange of crypto commodities, and would dramatically reduce the amount of volatile speculation that defines the space now.
Meanwhile, Target has issued a warning that it will be trimming its orders, offloading overstock, and cracking open its books to check its expenses. The company lost roughly 25% of its stock value last month when it issued weaker-than-expected revenue numbers for the first part of the year. Now the company seems to be struggling to get its expenses under control.
Lawmakers in the US have been floating the idea of regulating crypto for years now. The highly volatile and speculative nature of cryptocurrency makes it a lucrative target for scammers who want to make a quick buck, and countless hackers have stolen everything from NFTs to crypto tokens using underhanded online strategies. By moving to make crypto assets into commodities, Gillibrand and Lummi’s bill would bring crypto under the authority of the Commodity Futures Trading Commission.
The senators’ offices jointly described the bill as “landmark bipartisan legislation that will create a complete regulatory framework for digital assets that encourages responsible financial innovation, flexibility, transparency, and robust consumer protections while integrating digital assets into existing law.”
Notably, this law defines cryptocurrency as an ancillary asset, not as a security. In order to be considered a security, the crypto product would need to include features such as dividends, liquidation rights, or financial interest in the issuing entity–the kinds of things you might get when you buy stock in a company. Without these features, a financial product is nothing more than a speculative commodity, thus explaining why the bill would categorize crypto assets as lower-tier investments.
Regulation Has Been Brewing for Years
This isn’t the first time the US government has openly discussed regulating cryptocurrency. President Joe Biden penned an executive order earlier this year ordering government agencies like the Federal Reserve to look into creating the US’s own form of cryptocurrency. The SEC and its chairman, Gary Gensler, have both publicly called for the government to tighten its laws regarding digital assets.
“Currently, we just don’t have enough investor protection in crypto finance, issuance, trading, or lending,” Gensler said during a Congressional hearing in September. “Frankly, at this time, it’s more like the Wild West or the old world of ‘buyer beware’ that existed before the securities laws were enacted.” Ironically, under the proposed bill, crypto wouldn’t usually fall under the SEC’s jurisdiction. However, Gensler’s warning still rings true, whether crypto would fall under the SEC or the Commodity Futures Trading Commission.
“My home state of Wyoming has gone to great lengths to lead the nation in digital asset regulation, and I want to bring that success to the federal level,” Lummis told reporters recently. “As this industry continues to grow, it is critical that Congress carefully crafts legislation that promotes innovation while protecting the consumer against bad actors.”
Target Up Against the Wall
American retailer Target is struggling to meet its revenue goals in 2022. Shipping constraints, soaring labor costs, and rampant inflation have all contributed to the company’s problems this year. After announcing its shocking earnings miss last month, the company saw its share price crater by roughly 25%. Now the company is warning that the carnage isn’t over yet.
The company’s shares fell 6% this morning on the news that it planned to offer discounts to slim down its overstock. “The fear in the market is that earnings estimates, underpinned by weaker net profit margins, could become the next layer of focus,” writes Quincy Krosby, chief equity strategist for LPL Financial.
Stocks Flagging After Strong Monday Performance
All three major indexes finished ahead on Monday, though this winning pattern wasn’t meant to last. The S&P 500 dropped 0.8% this morning, while the Dow Jones Industrial Average slid almost 200 points. Meanwhile, the Nasdaq Composite index tumbled by 1%.
The market isn’t all bad news this morning, though. The 10-year U.S. Treasury benchmark held above 3%. This whipsaw pattern is as frustrating for companies as it is for investors. In short, no one can agree whether the market is on the verge of collapse or a massive rally. For now, everyone is holding their breath and waiting to see what happens next.