Bitcoin has rebounded above $30,000 (£23,953) after a proposed US could initiate sweeping changes for cryptocurrency regulation.
The bipartisan crypto bill, proposed on Monday by Republican senator Cynthia Lummis and Democrat senator Kirsten Gillibrand would see the US Commodity Futures Trading Commission (CFTC) oversee bitcoin (BTC-USD), ethereum (ETH-USD) and most other digital assets.
Ahead of the proposed bill, the cryptocurrency market rose 2.3% on Tuesday, to a total market cap of $1.3tn.
Bitcoin was trading at $30,000 on Wednesday, up 3.4% in 24 hours.
However, bitcoin's market cap slid below the $600bn level to $579bn, after high trading volume on exchanges.
Ethereum, the second largest cryptocurrency by market capitalisation, gained 2.4% to trade at $1,805.
The new legislation, known as the Responsible Financial Innovation Act, is an attempt to incorporate digital assets into existing financial regulatory laws in the US.
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The bill will propose a diversified asset allocation for the sector and a framework for cryptocurrency regulation within the US.
The major change set forth in the proposed bill is that cryptocurrencies would be classified as commodities rather than securities.
There is ongoing debate over whether to classify blue chip cryptocurrencies as securities, commodities or currencies.
The clarity given by classifying cryptos has been welcomed by investors, who see regulation as bolstering confidence in the sector.
The new bill would also see bitcoin transactions up to $200 become tax-free, encouraging its use as currency for small purchases.
The bill would also require the IRS in the US to adopt guidance on merchant acceptance of digital assets and charitable contributions.
In an email statement released yesterday, Lummis said the new bill “creates regulatory clarity for agencies charged with supervising digital asset markets, provides a strong, tailored regulatory framework for stablecoins, and integrates digital assets into our existing tax and banking laws".
Bitcoin proponent Michael Saylor welcomed the new bill and tweeted that "bitcoin will benefit from regulatory clarity, which will facilitate and accelerate the participation of traditional banks, public companies, and institutional investors, growing the entire digital assets industry".
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The news comes after the Bank of England's (BoE) executive director for markets Andrew Hauser said last Wednesday that creating a central bank digital currency (CBDC) for the UK would not be a challenge for Britain's central bank.
At a Federal Reserve discussion in the US Hauser was positive about the introduction of a digital currency by the BoE: "Balance sheet considerations do not obviously present any 'redline' arguments against CBDC adoption and the use of the central bank balance sheet to provide state-backed transactional money is one of our most longstanding functions."