On Wednesday, US lawmakers came together to discuss the crypto regulations in the country. Notably, the two committees in the House of Representatives held the first-ever joint hearing related to crypto seeking to carve a path forward to legislation on digital assets.
The hearing, held by the House Financial Services Committee (HFSC) and the House Agriculture Committee, was titled “The Future of Digital Assets: Measuring the Regulatory Gaps in the Digital Assets Market.” Sources reveal that the initial stages of the hearing proved more aggressive with Democrats taking the lead and questioning whether crypto-specific legislation should be signed at all.
Patrick McHenry, HFSC chairman and Republican from North Carolina, had announced that the hearing would take place this month at an event in April, confirming that it would relate to the market structure surrounding digital assets. In his opening remarks, he stressed to his fellow committee members that “the purpose here is to make law.” He said:
We need to get this right, for a couple of reasons. One is to harness innovation and enable consumer protection. The other is to ensure that the CFTC and the Securities and Exchange Commission will work together to ensure that consumers are protected, unlike what is currently happening.
McHenry’s counterpart and ranking Democrat within the committee, Maxine Waters, agreed that it was time to get back to drafting legislation. She highlighted the requirement of limits on the Security and Exchange Commission (SEC)’s authority to go after fraudulent crypto firms. She suggested that these issues should be “bipartisan concerns” and “legislation to address them should have a path to the President’s desk.”
However, Stephen Lynch, a fellow Democrat lawmaker who is present on the digital assets subcommittee, wasn’t entirely in agreement. He argued that implementing new legislation for digital assets seems “redundant and unnecessary” as the existing securities laws have “sustained massive innovation in our financial system for decades.”
Notably, his comments resonate well with those presented by SEC chairman Gary Gensler, who has often reiterated that the existing laws in the country provide his agency with ample authority to regulate crypto. He also implied that the only problem is the crypto sector’s failure to comply with rules.
However, the Commodities and Futures Trading Commission (CFTC) has been locking horns with the SEC for years. The CFTC heads have implied that the regulator has more authority over crypto than Gensler understands or acknowledges.
As the session came to its end, Brad Sherman, the Californian Democrat, and a prominent crypto critic, questioned whether digital assets should even have a future in the US. Furthermore, he referred to crypto as a “hidden money system” that diverts capital investment from useful industries, and whose “announced purpose” is to defeat sanctions and tax laws. He added:
Crypto bros make money literally by making money, and they’ve made over a trillion dollars. They’ll accuse the U.S. government of making money out of thin air. Maybe we do, but we’re the U.S. government.
Concluding the session, McHenry claimed that the SEC’s current approach to disclosure statements and registrations “doesn’t work for digital assets,” and that the CFTC needs additional authority over the market. He added “The CFTC and SEC alone can’t do this. Congress must act.”
The US has been extensively figuring out ways to regulate the sector but the imminent political divide between the parties has proved to be a roadblock. The Republicans and Democrats have polar opposite views when it comes to regulating crypto where Democrats have been more antagonistic towards the industry.
Considering this, lawmakers have also considered using crypto as a weapon for the upcoming elections next year. It will be interesting to see what shape the regulation takes in such a hostile scenario.