Senator Elizabeth Warren, a Democrat from Massachusetts, speaks during a Senate Banking, Housing, and Urban Affairs Committee hearing in Washington, DC, US, on Tuesday, May 16, 2023.
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WASHINGTON — Lawmakers took big steps this week aimed at regulating digital assets before closing up shop until September. Two of them represented victories for the nascent crypto lobby on Capitol Hill. The other could spell trouble ahead for the industry.
The House Financial Services Committee advanced a measure Thursday to establish a clear regulatory framework for the issuance of payment stablecoins. The bill also allows new stablecoin issuers into the marketplace under certain conditions.
Rep. Patrick McHenry, R-N.C., chair of House Financial Services, said his long-awaited stablecoin regulatory framework, the Clarity for Payment Stablecoins Act, creates a “uniform federal floor” for the digital assets, and protects consumers by requiring stablecoins to be backed “one-to-one by specific high-quality liquid assets.”
Committee Democrats, meanwhile, argued the bill undermines its own requirements by allowing any federal or state regulator to expand the list of eligible reserve assets.
Nonetheless, several Democrats voted with Republicans to move the bill forward, including Rep. Jim Himes of Connecticut and Rep. Josh Gottheimer of New Jersey.
The stablecoin vote came just a day after the same committee advanced a highly anticipated framework for crypto regulation, which delineated when a digital asset is a commodity and when it is a security, for purposes of oversight.
The bills’ approvals, after a roughly 14-month debate between committee Republicans and Democrats, can be viewed as wins for the crypto industry, whose reputation on Capitol Hill was battered by the failure of crypto giant FTX last fall.
But these victories were tempered by an effort in the Senate to rein in crypto’s far-reaching influence.
Late Thursday night, the Senate passed a massive defense funding bill that included several measures from different bills the digital-assets industry has opposed.
One of them authorizes the Treasury Department to establish examination standards to help prevent cryptocurrencies from being used to finance illicit activities. Another authorizes Treasury to conduct a study on how to counter anonymous crypto transactions, and solicits recommendations for legislation.
“Crypto has become the payment method of choice for rogue nations, drug lords, ransomware gangs, and fraudsters to launder billions of dollars in stolen funds, evade sanctions, fund illegal weapons programs, and profit off of devastating cyberattacks,” said Sen. Elizabeth Warren, D-Mass., who sponsored one of the bills which informed the amendment, in a statement.
Warren also highlighted the National Defense Authorization Act rider this week by reintroducing her bill, the Digital Asset Anti-Money Laundering Act. Democratic Sen. Joe Manchin, W.Va., and Republicans Roger Marshall of Kansas and Lindsey Graham of South Carolina also cosponsored the bill, to strengthen enforcement against foreign actors engaging in illicit crypto schemes.
The Senate defense bill will need to be reconciled with a House version this fall.
The House crypto bills would likely garner enough support to pass in the Republican-controlled House, but struggle to gain traction in the Democratic-controlled Senate
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