SEC’s Gary Gensler and other regulators took control of the crypto debate — this week, lawmakers will try to take it back
Proof of State is the Wednesday edition of Fortune Crypto where Leo Schwartz delivers insider insights on politics and regulation.
Like everyone who got their social studies education from School house rock should know, it is not easy to pass a law. For the crypto industry, last year seemed like a golden opportunity. There were enthusiastic lawmakers, bipartisan support on several key committees, and even an affable young founder willing to educate lawmakers and line their pockets with donations.
The difference a few months can make. After FTX exploded in November, these key committees used their last month before the break to go through the five stages of grief. When Congress returned in January, all the oxygen in the House was consumed by a bruising battle to appoint a speaker. And as the tentacles of FTX’s contagion unfolded, other DC players took advantage of the ensuing power vacuum, from the Securities and Exchange Commission’s Gary Gensler to banking regulators.
There have been signs of a crypto spring in Congress, from a low-key hearing in the Senate Banking Committee to a smaller bill proposed in the House Financial Services on Tuesday that would address the controversial definition of a crypto “broker.” Still, it’s hard to shake the feeling that the crypto world has missed its best chance on the Hill to get legislation, be it for stablecoins or market structure.
But as regulators continue to gather strength, lawmakers are finally starting to show signs of life on the crypto front, with this week shaping up to be the most eventful so far this year. On Tuesday, Senate Banking hosted Fed Chair Jerome Powell, where he touched on banking regulators’ vigilance against crypto risk while warning against regulation that could “stifle innovation,” and the Senate Environment and Public Works Committee hosted a hearing on crypto mining.
Wednesday will see Powell before a Republican-controlled House Financial Services and CFTC Chairman Rostin Behnam before Senate Agriculture, and Thursday will be the featured event: a crypto-focused House Financial Services hearing titled “Coincidence or Coordinated? The Administration’s Attack on the Digital Asset Ecosystem .” The committee, which includes crypto ideologues including Tom Emmer (R-Minn.), will surely be out for blood after aggressive moves by the SEC and banking regulators.
“I think you’ll see a repeat of the role of Congress there,” said Ron Hammond, director of government relations at the Blockchain Association. “Legislation is the ultimate goal here.”
Given the divided Congress, the FTX fallout, and shifting priorities, we’re likely to see preferred bills come from different sources. While the Senate Agriculture’s Digital Commodities Consumer Protection Act seemed like a favorite last year, the committee is still trying to shed the memory of Sam Bankman-Fried, and as Hammond pointed out, it will have its focus on the once-every-five-year farm bill, along with its House counterpart . The Senate Banking Committee, which produced a DCCPA alternative last year, now appears to be focused on the money laundering legislation that has sparked an outcry from the crypto industry.
Instead, the House Financial Services Committee appears to have the early advantage in advancing crypto legislation. That is, if it’s not too busy lobbing bombs at Gensler. Unfortunately, the SEC chairman will not be present at his blockbuster hearing on Thursday.
Leo Schwartz
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@leomschwartz
This story was originally featured on Fortune.com
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