Crypto bills to face congressional committee vote

The crypto industry has been in the regulatory crosshairs since investors were burned last year by sudden collapses of Celsius Network, Voyager Digital, FTX and other companies.

Among the legislation the House Financial Services Committee is considering on Wednesday and Thursday are a bill that would define when a cryptocurrency is a security or a commodity and another that would establish a regime to oversee stablecoins – digital tokens typically backed by traditional assets like the U.S. dollar.

The markups – where legislation is debated and brought to a vote, paving the way for a full vote by the House of Representatives – are the first time crypto regulatory bills will be put to a vote in Congress, a victory for crypto lobbyists that have pushed lawmakers to provide regulatory clarity for the industry.

“Obviously we’ve had some important decisions come from the courts in the past, but this is by far the most significant legislative moment that we’ve had,” said Kristin Smith, CEO of the Blockchain Association.

Still, it remains to be seen if the bills will garner any Democratic support, a factor seen by many as crucial to the bills’ ultimate chances of becoming law.

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The measures also would likely face obstacles in the Democratic-led Senate, where the head of the Senate Banking Committee, Sherrod Brown, has said he is unsure if additional legislation to regulate crypto is necessary. Representative Patrick McHenry, the Republican chair of the committee, has indicated that his priority is advancing a crypto market structure bill, which would expand the Commodity Futures Trading Commission’s (CFTC) oversight of the crypto industry, while clarifying the Securities and Exchange Commission’s jurisdiction, as many crypto advocates complain of the agency’s perceived overreach. His committee is expected to consider that bill during a markup on Wednesday, while the House Agriculture Committee will consider the same bill on Thursday.

“As other jurisdictions like the UK, the [European Union], Singapore and Australia have moved forward with clear regulatory frameworks for digital assets, the United States is at risk of falling behind. We intend to change that today,” said McHenry at the outset of Wednesday’s markup.

The bill has galvanized many in the crypto industry, who say that with Democrats’ support, the bill could have a shot in the Senate.

“For anything to be sticky, it’s going to need some bipartisan backing,” said Miller Whitehouse-Levine, CEO of the DeFi Education Fund, a lobbying group focused on decentralized finance.

Clarity on tokens

Crypto companies started out in a regulatory gray area, but the SEC has steadily asserted its authority over the industry, arguing that most cryptocurrencies are securities and subject to investor protection rules. That effort escalated last month when the SEC sued crypto exchanges Coinbase and Binance for failing to register some crypto tokens. The pair deny the allegations.

Most crypto companies dispute the SEC’s jurisdiction, and have pushed Congress in recent months to write laws clarifying that cryptocurrencies are more akin to commodities than securities.

It is unclear if any Democrats will back the market structure bill, including Representative Maxine Waters, the top Democrat on the Financial Services committee.

At the markup on Wednesday, Waters said the bill would create more confusion and offer consumers and investors fewer protections than they have currently.

“This bill heeds the calls from the crypto industry while disregarding the views of the administration, the Securities and Exchange Commission and consumer and investor advocates,” she said.

Lawmakers are also set to consider on Thursday a bill that would have the Federal Reserve write requirements for issuing stablecoins while preserving the authority of state regulators.

The bill was modified to address concerns from some Democrats, including Waters, that stablecoin issuers could evade stricter oversight by opting to be regulated under a state regime.

While McHenry in an interview this month told Politico he remained hopeful that he and Waters would reach an agreement on the bill, he also said a federal stablecoin regime is “not essential,” adding that there are state frameworks already in place.

McHenry on Wednesday said he had “no news” on discussions with Waters on the stablecoin bill, but that the two were continuing negotiations.