WASHINGTON: A key congressional committee is set to vote this week on several bills that would develop a regulatory framework for cryptocurrencies, a milestone for Capitol Hill in its efforts to codify federal oversight for the digital asset industry.
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 scheduled to consider 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 US 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.
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.
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 most cryptocurrencies are securities and subject to its 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.
A spokesperson for Waters did not respond to a request for comment.
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 told Politico in an interview this month 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 there are state frameworks already in place.
A spokesperson for McHenry did not respond to a request for comment.