The proposals to regulate cryptocurrency that have been circulated so far on Capitol Hill have largely been favorable to the industry, but opposition to that approach is beginning to organize.
In what is almost certainly a first step toward building a coalition in favor of tough regulation, Sen. Elizabeth Warren of Massachusettes is circulating a letter among her colleagues that calls on Acting Comptroller of the Currency Michael Hsu to revoke the pro-crypto ruling that would allow banks to become more deeply involved with digital assets.
The three interpretive letters, issued by then-Comptroller Brian Brooks between July 2020 and January 2021, give banks permission to custody crypto for clients, hold stablecoin reserve accounts, and use stablecoins to make payments and settle transactions. Brooks had been public crypto exchange Coinbase’s chief legal officer before being appointed acting comptroller.
In the letter she wants other senators to sign, Warren said Hsu’s earlier decision allowing the rulings to stand but telling banks to seek the permission of the Office of the Comptroller of the Currency (OCC) didn’t go far enough, Bloomberg reported.
Citing the recent $48 billion collapse of a stablecoin and subsequent bankruptcies at crypto lenders, the letter said those rulings have exposed banks to unnecessary risk — even though Hsu’s stance has been widely interpreted as ask first so we can tell you no — as they don’t “properly address the shortcomings of the preceding interpretive letters and the risks associated with crypto-related banking activities, which have grown more severe in recent months.”
However, battle lines are being formed, and the crypto-friendly group is better organized, with the Congressional Crypto Caucus led by the House’s Tom Emmer of Minnesota and Bill Foster of Illinois.
Here’s a look at some of the key players in the coming fight over crypto regulation, which will begin in earnest in October, when federal agencies are slated to present a plan for a broad regulatory framework for crypto to comply with President Joe Biden’s March executive order.
It’s important to note that this isn’t a pro-crypto/anti-crypto list, but rather a look at members of lawmakers who have been active in the field. Virtually every member of congress who has discussed the issue publicly has stated they want to balance protecting innovation with protecting the public.
A Light or Heavy Hand?
One key differentiator is whether cryptocurrencies should be treated as securities under the Securities and Exchange Commission’s (SEC) authority or as commodities under the oversight of the Commodity Futures Trading Commission (CFTC). The latter is thought to offer a lighter-touch approach and is favored by the crypto industry, while SEC Chairman Gary Gensler’s position is that virtually every cryptocurrency is a commodity.
Leaders of this campaign begin with Sens. Cynthia Lummis of Wyoming and Kirsten Gillibrand of New York, whose Responsible Financial Innovation Act was the first fully formed regulatory framework proposal introduced. It would give the CFTC control of crypto. So would the Digital Commodities Consumer Protection Act proposed by Sens. Debbie Stabenow of Michigan and John Boozman of Arkansas, who chair the Senate Agriculture Committee that oversees the CFTC.
In the House, Emmer and Reps. Darren Soto of Florida and Ro Khanna of California introduced The Securities Clarity Act, which would define fewer cryptocurrencies as securities than Gensler would prefer.
Rep. Patrick McHenry of North Carolina, meanwhile, has the Clarity for Digital Tokens Act, which would also exclude some tokens from being classified as securities.
Long-time crypto-skeptic Rep. Maxine Waters of California, chair of the House Financial Services Committee, in June organized the Digital Assets Working Group for Democrats, which includes Rep. Brad Sherman of California, another vocal critic of digital assets. Then again, it also includes Rep. Ritchie Torres of New York, who told Politico in March that “radically decentralizing the internet and finance strikes me as a profoundly progressive cause. You should never define any technology by its worst uses.”
Rep. Stephen Lynch of Massachusettes chairs the FinTech Task Force and has introduced the ECASH Act, which would create a U.S. central bank digital currency (CBDC). Its co-sponsors include Reps. Jesús “Chuy” García of Illinois and Rashida Tlaib of Michigan.
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