This week, U.S. Senator Cynthia Lummis announced that Bitcoin is the “hardest money ever created” and told the U.S. Federal Reserve (Fed) that it would be a “great idea” to buy Bitcoin. Naturally, the cryptosphere went wild. While many took to the comments, few were aware of who Lummis is, how she’s spearheading regulation or what “hard” money actually is. Let’s break it down.
Who Is Senator Lummis?
Before being elected to the U.S. Senate, Lummis served eight years as Wyoming’s state treasurer where she claims to have gained exposure to and explored many different classes of assets. At a panel discussion hosted by the Orrin G. Hatch Foundation, Lummis noted that the Fed holds $40 billion in foreign currency reserves and that they should strongly consider adding Bitcoin to their balance sheet.
And Lummis has put her money where her mouth is. In fact, this longtime Bitcoin bull bought her first Bitcoin in 2013 when it was trading for just $330, “because I believe in the economic power of scarcity and the potential for Bitcoin to address some of the manipulations in our financial system."
What Is Hard Money?
On the same panel mentioned above, Lummis stated that, "Bitcoin is digital gold. It's hard money." So what does “hard money” mean exactly?
Hard money refers to a currency that is difficult to create more of. Fiat currencies, like the US dollar and British pound, can easily be printed to increase supply, making them soft currencies, while Bitcoin’s monetary issuance is deflationary and predictable, making it hard.
Bitcoin’s halving mechanism controls the number of new coins entering circulation. Every four years, or 210,000 blocks, the halving automatically executes and the miner’s reward (a reward given to miners for verifying transactions) is halved, thereby controlling the number of coins minted each time.
To date, 90.7% of all BTC has been minted. Due to this mechanism, it will take 102 years for the last Bitcoin to be mined (expected to take place in 2140).
The Regulation Eruption
While the crypto community has enjoyed the positive spotlight shed on Bitcoin and the broader digital currency market, Lummis is spearheading crypto regulation. Together with Democratic Senator Kirsten Gillibrand, last week Republican Senator Lummis submitted a draft bill which looks to provide crypto regulatory clarity to Congress in what is a rare instance of bipartisan collaboration.
The 69-page draft bill sheds light on what future crypto regulation could look like and provides a potential roadmap for not only American legislation, but for other countries currently trying to build legal frameworks around the use of digital currencies.
Some of the key elements discussed in the draft bill include:
- Making crypto transactions under $200 tax-free.
- Creating guidelines which can be used to categorise cryptocurrencies as either commodities or securities.
- Making stablecoins 100% backed by cash or cash equivalents and regularly audited.
- Giving the U.S. Commodity Futures Trading Commission (CTFC) exclusive spot market jurisdiction over cryptocurrencies defined as commodities.
- Making the U.S. Securities and Exchange Commission (SEC) and CFTC the chief watchdogs over the digital asset industry.
Lummis tweeted, “As a former state treasurer, I am excited by the possibilities of incorporating digital assets into the American financial system. The legislation that @SenGillibrand and I are proposing will do just that.”
Insiders are calling the bill a “sigh of relief”. Let’s watch this space to see if this draft bill will make it out of committee and onto the Senate floor for debate.