The Senate’s crypto queen has a sweeping new Bitcoin bill

“This is the starting point for discussions about what the law should look like,” said Miles Jennings, cryptocurrency general manager and head of decentralization at Andreessen Horowitz, the Silicon Valley venture firm that is a major investor and lobbying force in the world of digital assets. “I think that’s one of the reasons we’re excited about it.”

The contents of bill will likely shed light on who is in power in the ever-expanding universe of crypto-lobbying. It has already been the source of clashes between the industry’s growing set of industry associations supported by competing start-ups of digital assets. Assistants from both lawmakers’ offices say they have been inundated with incoming proposals on how to approach everything from cryptocurrency exchanges to tax policy.

It is one of several cryptocurrencies that lawmakers have begun to prepare as companies that are looking for influence.

“It’s hard to pay attention to things that are abstract, and for most members of Congress, this has been abstract for a long time,” Lummis, who has owned Bitcoin since 2013, told the audience at the Bitcoin Miami conference earlier this year. “It’s changed dramatically in the last 12 months – and some of it is thanks to all of you.”

Crypto-skeptics warn that the madness surrounding the bill is part of a growing push by crypto firms to persuade lawmakers to shield them from traditional finance regulations.

Both senators are fighting to make their respective states hubs for a blockchain-based economy. State lawmakers in Wyoming have mapped an aggressive course in making new laws to accommodate crypto banks and decentralized trading platforms. In Empire State, New York Mayor Eric Adams has sought to attract digital asset companies by investing his early paychecks in bitcoin and ether.

“New York is the center of the world’s financial markets,” Gillibrand said at a POLITICO Live event with Lummis earlier this year. “This is one of the largest growing industries that New York definitely wants to be a part of.”

A leaked draft of the bill, by Lummis mentioned dates from before Gillibrand announced his involvement, setting off alarm bells with the Center for American Progress, a left-leaning think tank. The group’s director of financial regulation and corporate governance, Todd Phillips, said it would have created new avenues for token-based startups to circumvent securities legislation and allowed investors to avoid taxes on cryptocurrencies where they earn less than $ 600. Gary Gensler, Chairman of the Board of the Securities and Exchange Commission, has repeatedly claimed that most digital assets are likely to fall under the agency’s jurisdiction, which puts him at odds with industry leaders who want to avoid the agency.

“The challenge with legislation on digital assets is that most if not all of it is covered by existing legislation. The question then becomes, what are you trying to achieve by drafting this new legislation?” said Ty Gellasch, a former SEC official who is the CEO of the investor advocate group Healthy Markets.

The bill’s planned release on Tuesday is likely to spark clashes between industry groups, crypto watchdogs and academics over the details. In addition to new rules for trading platforms and providers of crypto services, the bill is also expected to cover issues related to cyber security, banking regulation, investor protection standards and stack coins.

Kara Calvert, head of US policy at the listed cryptocurrency exchange Coinbase, described both Gillibrand and Lummis as having an “open door” policy when it comes to taking feedback on details. She said that it put the congressional staff in charge of writing the bill in a position where they “balance what their bosses want and what they get from stakeholders”.

An earlier draft of the bill included languages ​​that would have established self-regulatory organizations for industry – a proposal sought by the Association of Digital Asset Markets (ADAM), but flagged as potentially cumbersome by the Blockchain Association. ADAM is supported by FTX, a cryptocurrency exchange led by political mega-donor Sam Bankman-Fried. Blockchain Association members include the trading platforms Crypto.com and Kraken.

“[Lummis and Gillibrand] want to make sure they get things right from an industry standpoint and also from a consumer protection standpoint, said ADAM CEO Michelle Bond in an interview. “I just do not know where this will happen in the end.”

In public appearances, the two legislators have outlined the broad outlines of the bill’s political goals. They want to exempt Bitcoin miners from rules that cover financial brokerage firms and give the Commodity Futures Trading Commission – a smaller sister agency to the SEC that monitors financial derivatives markets – more authority to monitor crypto markets.

The specifications of these provisions will be as important as the top-line description.

Jennings, along with Andreessen Horowitz, said he expects industry players to be disappointed with how much leeway the bill can give the SEC to determine whether certain digital assets are securities. Crypto executives have criticized the agency’s management for its tough approach to digital currency trading.

Hill employees who have worked on the bill said that both the SEC and the CFTC have weighed in.

Crypto lawyer Lewis Cohen – who advised Lummis employees on the bill – said it was an almost impossible task to balance the concerns of industry leaders and regulators.

“To treat all tokens reflexively as securities, I truly believe that this is both the wrong legal and fundamentally bad policy for the United States,” said Cohen, co-founder of DLx Law. “But just ignoring the SEC’s concerns is wrong legally and bad for the United States.”

Lobbying is likely to accelerate and expand in the coming months. At a recent industry conference in Washington, Lummis and Gillibrand said that as many as four Senate committees would have jurisdiction over their legislation, if there was ever a vote.

“This is going to be a big focus of debate,” Blockchain Association CEO Kristin Smith said in an interview. “If this is a needle that can be threaded, then [it’s] is going to be a very important moment in the ecosystem. “

Ben Schreckinger contributed to this report.