The crypto industry is on a winning streak in Washington, but it may not last long.
After a surprise victory in a major lawsuit against the Securities and Exchange Commission earlier this month that could severely limit the SEC’s powers to regulate cryptocurrencies, the House Financial Services Committee is expected to pass two bills this week that have broad industry support and would bring regulatory clarity to the space.
Continue reading: A ‘Wild Outcome’: How the Ripple Decision Disrupts the Battle Between SEC and Crypto Industry
But despite the optimism that the SEC’s partial loss in its enforcement case against Ripple
Democrats and Republicans have “collaborated” to revise a pending market structure bill, “but these talks are not moving in a positive direction,” Isaac Boltansky, director of policy research at BTIG, wrote in a Sunday note to clients, adding that he was “embarrassed” about passing a crypto market structure bill this year.
Republicans in the House of Representatives appear intent on passing new legislation — backed by North Carolina Financial Services Committee Chairman Patrick McHenry and Pennsylvania Agriculture Committee Chairman Glenn Thompson — that would expand the Commodity Futures Trading Commission’s role in overseeing digital assets at the expense of the SEC, a key industry demand.
There are a few House Democrats who appear keen to support the McHenry-Thompson bill, but there is little evidence that the party leadership is behind the effort, and there is plenty of evidence that it will struggle to find support in the Democratic Senate.
Ohio Sen. Sherrod Brown, the Democratic chair of the Senate Banking Committee, told Politico Monday that his top priority when it comes to crypto is “doing whatever is necessary to take action against money launderers and criminal syndicates using crypto.”
The House bill would have to go through Brown’s committee before it would have a chance for a full Senate vote.
Even crypto advocates in the Senate, like Wyoming Republican Cynthia Lummis, seem eager to assuage fears that crypto encourages criminal activity before passing legislation intended to provide regulatory clarity.
“If we can address that part from the beginning, before the regulatory framework is passed, then we’ve taken those concerns off the table,” Lummis told Politico. “And we can actually talk about regulation of digital assets.”
Last week, Lummis partnered with Republican Sen. Mike Rounds of South Dakota and Democratic Sen. Elizabeth Warren of Massachusetts and Sen. Mark Warner of Virginia to add an amendment to the annual Defense Authorization Act to prevent the use of crypto assets in illicit financial transactions.
A separate illicit cryptocurrency bill introduced last week by Rounds and Republican Senator Mitt Romney of Utah also drew widespread criticism from industry groups last week.
“We can understand wanting to prosecute individuals who facilitate money laundering and sanctions evasion by offering services that are decentralized in name only,” wrote Jerry Brito, executive director of crypto think tank Coin Center, last week. “But a blanket ban on releasing open-source code for decentralized crypto protocols…means ceding the realm of innovation to the rest of the world.”