Encryption midterm cheat sheet – POLITICO

With help from Derek Robertson

Tomorrow is a great day for America, but what does it mean for crypto?

Overall, the makeup of the next Congress is expected to be younger and more Republican, two trends that favor a more crypto-friendly environment on Capitol Hill.

But changes in control come with friction that could delay bipartisan efforts to regulate crypto at a time when the industry says it wants more clarity sooner.

So here’s what to look for on Tuesday, and what to expect after that.

SENATE

If the Republicans take the upper chamber, Sen. Sherrod Brown of Ohio, one of the most outspoken crypto-skeptics in Congress, will lose his chairmanship of the Banking Committee, with Tim Scott from South Carolina will likely replace him.

Like our colleagues at Morning Money noted FridayScott is “a blank slate on cryptopolitics,” so his ascension would be a wild card.

Meanwhile, Tuesday is expected to bring some young, new pro-crypto Republican faces to the Senate.

In Ohio, JD Vance is favored to win the state’s open seat, while Blake Masters is still the underdog in Arizona.

While the two Peter Thiel acolytes have received the most attention, their millennial friend Katie Brittwho is expected to win the Alabama Senate race, has too embraced crypto.

In North Carolina, Rep. Ted Budd is expected to win his bid in the Senate. His effort in the house, as a bid for repeal a measure which would have given the Treasury new powers over crypto, has won him favor from industry. (And at 51, he also counts as young by the Senate’s current standards.)

HOUSE

If, as expectedRepublicans win back the House, Patrick McHenry of Virginia is in line to take over the chairmanship of the Financial Services Committee, a prospect that has rankled Wall Street and the crypto industry who have spat over his bias toward tech-driven upstarts. (For Pro subscribers, POLITICO’s Sam Sutton has written more about this dynamic).

As recently as last month, McHenry expressed his annoyance with the SEC’s approach to regulation in crypto enforcement, a the industry bugbearand raises the possibility that he will bring agency director Gary Gensler before the committee to answer for it.

However, when it comes to crypto and Republicans, there may be such a thing as too much win. The industry is determined not to let technology become a partisan issue, but a wave election could wipe out some of the House of Representatives, which Josh Gottheimer from New Jersey, which has dabbled in crypto regulation and now faces competing races.

NEW YORK

In the most important state for financial regulation, pro-crypto Republican Lee Zeldin has a chance to upset the incumbent Democrat Kathy Hochulwho have not taken a specific position for or against the industry.

The state legislature passed a moratorium on crypto mining in June, but it has remained on Hochul’s desk, with its ultimate fate unclear. On a debate last monthHochul would not say whether she intends to sign it, while Zeldin said he would not sign a moratorium.

But here, too, a Republican victory would entail a certain risk for the industry. Perianne Boring, founder of the Digital Chamber of Commerce, a trade group, said the industry’s views Adrienne Harris, the current superintendent of the state Department of Financial Services, as deeply knowledgeable about crypto. She said a Zeldin win carries a risk that he could install a new regulator that was less familiar with the technology.

In case you missed it: Just before the weekend, the Federal Reserve Bank of New York released his report on “Project Cedar,” its experiment in creating a digital central bank currency.

The New York Fed is one of the regional Federal Reserve banks experimenting with a government-backed cryptocurrency, which Boston Fed and MIT’s collaboration on Project Hamilton. New York’s Project Cedar developed its own prototype CBDC and tinkered with it over 12 weeks, finding that blockchain technology enabled:

• Faster cross-border payments than the current system
• Something called “atomic settlement”, where payments are validated simultaneously for both parties, which reduces risk
• Greater interoperability across different types of banks (ie private and public)

In a statement says The New York Fed said the program “is not intended to advance any specific policy outcome, nor is it intended to signal that the Federal Reserve will make any imminent decisions about the appropriateness of issuing a retail or wholesale CBDC, nor how one would necessarily be designed ” — but as a rare, unambiguous “use case” for blockchain technology, it’s not hard to imagine the proponents pushing for such a thing. — Derek Robertson

Early in this newsletter’s life I wrote about The concept of “crime fighting in the metaverse,” looks at the question of what kind of policing a more lifelike virtual world might require, and who would do it.

At least one law enforcement agency takes that idea quite literally: Interpol, which unveiled last month its own “metaverse”. In a demo film set to a breathless simulacrum of a Hans Zimmer score, the agency shows off its virtual model of Interpol headquarters as well as claiming VR training programs aimed at “supporting our member states to fight crime and make the world, virtual or not, safer for those who live in it,” as Secretary General Jürgen Stock said in a statement.

The project may at first seem like another far-fetched example of the kind of metaverse hype-chasing that has led to companies as diverse as Nestle and Agency for creative artists to stand up his own metaverse stake. But there’s a much cleaner “in” for Interpol when it comes to virtual reality: As they point out, the World Economic Forum has already noted the potential for VR-specific versions of crimes such as phishing and hacking. — Derek Robertson

Keep in touch with the whole team: Ben Schreckinger ([email protected]); Derek Robertson ([email protected]); Steve Heuser ([email protected]); and Benton Ives ([email protected]). follow us @DigitalFuture on Twitter.

Ben Schreckinger covers technology, finance and politics for POLITICO; he is a cryptocurrency investor.

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