The revived Lummis-Gillibrand crypto bill will not touch the Fed’s main accounts

WASHINGTON — Sen. Cynthia Lummis, R-Wyo., said she and Sen. Kirsten Gillibrand, D-N.Y., aim to reinstate their the crypto regulation bill in mid-April, and a spokesman in Lummis’ office said the new version would not include a controversial provision that would make it easier for state-controlled banks to obtain a main account at the Federal Reserve.

On Thursday at an event hosted by the Milken Institute on the future of digital assets, Gillibrand and Lummis said they are continuing to work on the bill and that in some ways it will be more thorough than their previous version.

“We’re also looking to address some of the concerns we’ve heard from regulators and the industry to clarify in certain areas,” Gillibrand said. “It may be a more thorough bill than the first version because the first version was an introduction of what a basic framework would look like.”

The banks had reservations about the previous iteration of the bill, which said that any state-chartered depository institution would be entitled to an account at a Federal Reserve bank regardless of whether it is federally insured or supervised. The bill would also have authorized states and the Office of the Comptroller of the Currency to charter special banks issuing stablecoins. The collapse of crypto exchange FTX late last year increased regulatory scrutiny of cryptocurrencies’ infiltration of the banking system, Lummis said, and a spokesperson from her office clarified that the master account provision “will not be included.”

“The bill is going to be stronger,” Lummis added. “It’s also going to address some of the things that happened with FTX.”

The chances of the Lummis-Gillibrand bill making it through the Senate remain slim, especially as Senate Banking Committee Chairman Sherrod Brown, D-Ohio, continues to express skepticism about digital assets and how they interact with the banking system. Brown has shown little interest in scheduling a committee vote on any legislation.

“It would certainly require a change in approach for the banking committee to move forward with the markup,” Lummis said.

Still, Lummis and Gillibrand’s work on the bill has sent a powerful signal about attitudes toward crypto, especially among lawmakers who don’t want to hinder the industry. Lummis said that in the wake of the FTX bankruptcy, other lawmakers have been less willing to commit to the bill or to a wholesale effort to regulate crypto.

“The problem we have is conflating the fraudulent behavior with the underlying asset,” Lummis said. “Because there’s been a chilling effect, I think, in people’s willingness to be thoughtful and pursue this subject.”