Sen. Bill Hagerty (R-Tenn.), noting that a lack of regulatory certainty could drive the business outside of the United States, called for crypto legislation on Thursday as Congress reconvened after its summer break.
Hagerty argued in front of an audience at the libertarian-leaning Cato Institute that the environment is horrible. It’s causing those businesses who want to invest and grow to look outside for regulatory frameworks that are more hospitable.
The need for crypto regulation was broadly supported by both parties up until the fall of the Sam Bankman-Fried-led cryptocurrency exchange FTX last November. Bills covering various aspects of the sector, from market structures to stablecoins, have been advanced by committees in both the House and Senate.
Bankman-Fried’s frequent visits to Washington, D.C., and his extravagant donation behavior compounded the situation, leading several lawmakers, particularly in the Democratic party, to call for a halt to any legislative negotiations. The Securities and Exchange Commission, among other agencies, increased enforcement proceedings in the interim, much to the dismay of the cryptocurrency business.
Hagerty has become a prominent voice on cryptocurrency in the Senate. Even though he hasn’t put forth any legislation this year, he has written letters to important government figures about the regulation of digital assets. In one letter from March to the Federal Reserve Chairman Jay Powell, FDIC Chairman Marty Gruenberg, and Acting Comptroller of the Currency Michael Hsu, he argued that the pressure that financial institutions are exerting on cryptocurrency firms “seems disturbingly reminiscent of Operation Choke Point, a common refrain within the crypto industry.
Hagerty advocated for an incremental approach to crypto legislation on Thursday at the Cato event, citing a two-page stablecoin law he submitted in 2021. He respects his colleagues, but it appears that they judge the importance of a piece of legislation by how many pages it has, he remarked.
Hagerty criticized the SEC’s “regulation by enforcement” strategy and argued that legislative organizations, such as his Senate Banking Committee, should have more oversight hearings with SEC Chairman Gary Gensler. He cited claims that Gensler had even approached the cryptocurrency exchange Binance to serve as an advisor as evidence for his perplexity about why Gensler had turned into a leading critic of the crypto industry after instructing a blockchain course at MIT.
The SEC has responded to criticism from the Republican party, with head of enforcement Gurbir Grewal claiming in June that cryptocurrency creates a “perfect storm of investor risk.” In an earlier complaint that month, the SEC brought 13 accusations against Binance.
Hagerty shared the criticism of central bank digital currencies, or CBDCs, made by other Republican congressmen. He claimed that CBDCs might push the United States closer to China in terms of monitoring economic behavior. He cited Saule Omarova, the candidate for the Office of the Comptroller of the Currency put up by President Joe Biden, who advocated for a government-backed digital currency in the wake of the banking crisis in March.
