A significant congressional committee on Wednesday passed a bipartisan bill that attempts to create a regulatory framework for cryptocurrencies, marking a significant step forward for Capitol Hill in its efforts to formalize federal regulation of the digital asset sector.
Since investors were burnt by the abrupt failures of Celsius Network, Voyager Digital, FTX, and other companies last year, the cryptocurrency industry has been targeted by regulators.
The legislation approved by the House Financial Services Committee would specify whether a cryptocurrency is a security or a commodity, broaden the Commodity Futures Trading Commission’s (CFTC) regulatory authority over the sector, and define the Securities and Exchange Commission’s (SEC) purported overreach into the cryptocurrency space.
Republicans on the committee and a few Democrats, including Reps. Jim Himes and Ritchie Torres, voted in favor of the measure. The same bill will be discussed Thursday by the House Agriculture Committee.
The United States runs the risk of falling behind while other countries such as the UK, the [European Union], Singapore, and Australia have advanced with clear legal frameworks for digital assets. At the markup, Republican Representative Patrick McHenry, chair of the House Financial Services Committee, stated that “we intend to change that today.”
The markup, where legislation is discussed and put to a vote, prepares it for a full House of Representatives vote, is the first time a crypto regulatory bill has been put to a vote in Congress. This is a victory for crypto lobbyists who have pushed lawmakers to give the industry regulatory clarity.
Although the courts have made some key rulings in the past, the CEO of the Blockchain Association, Kristin Smith, noted that this is by far the most significant legislative moment to date.
Many in the cryptocurrency business believe that with Democratic support, the bill has a chance in the Senate.
Anything that is persistent would require bipartisan support, according to Miller Whitehouse-Levine, CEO of the DeFi Education Fund, a lobbying group focused on decentralized finance.
Some Democrats, however, notably Representative Maxine Waters, the top Democrat on the Financial Services Committee, are vehemently opposed to the bill.
Waters claimed that the plan will increase uncertainty and provide consumers and investors with fewer protections than they presently have.
This bill responds to the crypto industry’s demands while ignoring the administration’s, the Securities and Exchange Commission’s, and consumer and investor activists’ concerns, she claims.
The bill may also face opposition in the Democratic-led Senate, where the chairman of the Senate Banking Committee, Sherrod Brown, has stated that he is unsure whether more crypto legislation is required.
CLARITY ON TOKENS
Crypto firms began in a regulatory limbo, but the SEC has increasingly asserted its control over the industry, claiming that most cryptocurrencies are securities and thus subject to investor protection legislation. Last month, the SEC sued cryptocurrency exchanges Coinbase and Binance for failing to register some crypto tokens. The claims are denied by both parties.
Most cryptocurrency companies contest the SEC’s jurisdiction and have lobbied Congress in recent months to pass legislation establishing that cryptocurrencies are more comparable to commodities than securities.
On Thursday, lawmakers will also examine a bill that would force the Federal Reserve to draught standards for issuing stablecoins while protecting the authority of state regulators.
The law was amended to address concerns raised by certain Democrats, notably Waters, that stablecoin issuers could avoid more scrutiny by opting for state regulation.
While McHenry told Politico earlier this month that he and Waters were still hopeful of reaching an agreement on the measure, he also stated that a federal stablecoin system is “not essential,” noting that state frameworks are already in place.
McHenry said on Wednesday that he had “no news” on discussions with Waters about the stablecoin bill, but that the two were still in negotiations.
