Crypto Bills: Time is Running Out on Congress’ Regulatory Efforts

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Jurisdictional questions about which agencies will regulate cryptocurrencies won’t be resolved any time soon.

The time of dreams

Perhaps 2022 was the year the crypto industry landed in the crosshairs of Congress. It may not be until 2023 that lawmakers will have something to show for it.

A series of high-profile bills meant to put the brakes on — and sometimes ease — the crypto industry have less and less chance of progress as lawmakers look to November’s midterm elections and the possibility Republicans win a majority in the House of Representatives.

The problem isn’t the usual partisan gridlock, but the reality of how little time is left to finalize deals, get bills through the necessary committees, and buy speaking time in the House and Senate. .

If bills stagnate, as some political analysts believe, crypto firms ranging from trading platforms to stablecoin issuers may have to continue operating in a gray area, unclear to what standards they will ultimately be held to. Government agencies, including the Securities and Exchange Commission, will also operate in this gray area.

The House has just 23 days, including weekends, before it leaves Washington on Sept. 30 in preparation for November’s midterm elections. After the election, he only has 17 voting days scheduled for the rest of the year. The Senate has an equally truncated calendar.

This leaves a very narrow window for lawmakers to make progress on high-profile crypto bills developed over the past few months, including a House effort to put in place guardrails around so-called stablecoins. whose values ​​are tied to the dollar and a Senate bill that would put oversight of much of the crypto market under the responsibility of the Commodity Futures Trading Commission.

A marker will come as early as next week, when the Senate Agriculture Committee tentatively plans to hold a hearing on a bill led by Committee Chair Debbie Stabenow (D., Mich.) and Ranking Member John Boozman ( R., Ark.).

The bill places trade in “digital commodities,” including Bitcoin and Ether, under CFTC oversight. Trading platforms such as

Coinbase

(symbol: COIN) and FTX would have to register with the CFTC, take steps to prevent market manipulation, and pay fees to help fund the agency’s oversight, among other requirements.

The bill does not attempt to define exactly what makes a specific cryptocurrency a commodity or security subject to SEC oversight. Putting that debate aside — a point of contention among lawmakers — the bill has a better chance than most of eventually becoming law, but likely not this year.

The two-part hearing tentatively includes a panel with CFTC Chairman Rostin Behnam and one with representatives from Citadel Securities, Coinbase, the Stellar Development Foundation, the Center for American Progress and the Crypto Council for Innovation, according to sources. people familiar with the matter.

A second effort on a crypto bill, led by the House Financial Services Committee, is facing similar challenges as the clock ticks down. Committee Chair Maxine Waters (D., Calif.) and Ranking Member Patrick McHenry (R., NC) tried for months to reach an agreement on how to regulate stablecoins, a kind of digital currency that tries generally to maintain a stable value of a dollar by keeping an equivalent amount of dollar-denominated assets in reserves. The bill would govern which entities are allowed to issue stablecoins and which assets are eligible to serve as reserves, among other issues.

A Financial Services Committee schedule released last week by Waters’ office said a hearing to review stablecoin legislation “may be added to the schedule at a date and time to be determined.”

“Republicans have little reason to compromise now because they could get a better deal next year if they take over the House,” said

cowen

analyst Jaret Seiberg in a research note Tuesday. “The Senate is even less likely to consider a stable coin bill. There is simply not enough time before the end of this congress at the beginning of January.

Email Joe Light at joe.light@barrons.com

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