The SBF has agreed to testify in Congress. Here’s What Lawmakers Are Thinking About Crypto Laws

Bankman-Fried is expected to return to his (possibly virtual) hometown of Washington on Tuesday, where he says he will witness at the House Financial Services Committee hearing on the collapse of his exchange FTX. After a few years act as a face Regarding the regulatory efforts of cryptocurrencies, Bankman-Fried will find a much colder environment later disclosure that he directs the client’s money for his trading company, Alameda Research, lost billions of dollars in the process.

The bankruptcy of FTX will not only change the trajectory of the cryptocurrency but also the way lawmakers will approach the industry. Through interviews with 11 current and former congressional staffers, industry leaders and policy experts, Luck learned of how events of the last month have shaped current thinking about crypto law, which will likely be at the forefront of policy discussions during the next congressional session. .

“Every good crisis presents an opportunity for us to better understand what happened in the process,” said Denelle Dixon, CEO and CEO of the blockchain-focused Stellar Development Fund. past — but also to create stability in the market.” .

‘Motivation’ in Washington

The crypto industry lacks any meaningful regulation in the US, something everyone from the Commodity Futures Trading Commission chair Rostin Behnam arrive Leading cryptocurrency lawyers often complain. The result has been a lack of clarity around regulatory oversight, with the biggest question remaining as to which cryptocurrencies are securities and which are under the supervision of the Securities and Exchange Commission, and which are not. is monitored by the CFTC.

The past year has seen a flurry of activity between various committees in both the House and Senate to propose legislation that addresses this fundamental issue, as well as other important questions such as how to regulate it. centralized exchanges and stable money.

Report of a turf war between the SEC and the CFTC emerged, with the CFTC rudely fighting for more resources and oversight, while SEC chairman Gary Gensler repeat that the current regulatory environment is sufficient, refuse to enact clearer rules that the crypto industry call and claims that nearly every cryptocurrency is a security, with the sole exception of Bitcoin.

As Congress debated legislation to create barriers to the industry, Bankman-Fried established himself as a regular in Washington, appearing at congressional hearings and meeting with lawmakers and agencies. management in the back. Like Behnam witness after the collapse of FTX, he met with Bankman-Fried 10 times in a special clearing app—Bankman-Fried estimates that he spent “tens of thousands” of hours on commissions.

The aim of the SBF is not only to advocate for its companies’ applications, but also to promote legislation that benefits the industry. Specifically, he helped shape and support a Senate Agriculture Committee bill called the Digital Goods Consumer Protection Act—led by Senator John Boozman (R-Ark.) and Debbie Stabenow (D-Mich.)—will have expanded CFTC oversight and funding.

“The driving force behind DCCPA is Sam Bankman-Fried and FTX,” said Kristin Smith, executive director of the Blockchain Association.

The CFTC—and commodities, including at least Bitcoin and possibly Ether—are under the jurisdiction of the Senate Agriculture Committee because history of the cereal market. The DCCPA has deliberately narrowed its scope to the CFTC’s role in regulating cryptocurrencies, with the idea that it would be easier to introduce a bill under the jurisdiction of a committee, rather than bring it up. a long financial code like Dodd-Frank.

Brett Quick, head of government affairs for the trade association Cryptocurrency Innovation Council, said that of all the potential crypto legislation, DCCPA has the broadest momentum and support, though she said that passing it by the end of the year “will always be a heavy lift.

The November events, and the bill’s association with Bankman-Fried, has hurt its chances. The Senate Agriculture Committee is the first hold an FTX hearing, with committee members stressing the need for a full re-examination of the bill. Meanwhile, regulators and lawmakers have openly criticized it, with Gensler describe it’s “too light to touch.”

According to one person with direct knowledge of the matter, the chance for the bill to get passed before the end of the year has essentially disappeared, although it is expected to be reintroduced later this year. next year with updated text and potentially amalgamation of similar legislation.

Lummis-Gillibrand and stablecoins

While the DCCPA is more likely to pass, other proposals vie for places. One of the most prominent is the Responsible Financial Innovation Act issued by Sens. Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (DN.Y.), commonly known as the Lummis-Gillibrand bill.

The bill has a broader scope than the DCCPA, including a greater clarification of the differences between the SEC and the CFTC, as well as the creation of a “Financial Innovation Advisory Committee,” made up of industry leaders, policy experts and regulators.

“It can be challenging to deliver a bill of this size and scale on your own,” Quick said, adding that it would likely be broken up into pieces and sent to different committees. before regrouping into a larger package.

One of the biggest unknowns is the support of two key Democratic senators—Sens. Sherrod Brown (D-Ohio) and Elizabeth Warren (D-Mass.)—with both raise suspicions about the need for new legislation amid growing skepticism towards the industry.

As someone familiar with the matter said Luck, The biggest question mark going forward is whether Brown and Warren can win. After the collapse of FTX, Brown called for comprehensive regulation, both on the Senate Agriculture Committee hearing and in one Letters to Treasury Secretary Janet Yellen—some of the actions seen as pivotal in his approach.

For skeptics like Brown and Warren, the Lummis-Gillibrand bill is a hard sell. Like DCCPA, it has close awareness to the industry, from Lummis and Gillibrand posting it to comment on the GitHub developer platform for Lummis more Bitcoin shines a laser at her Twitter Avatar.

Gillibrand is also working with Lummis and Senator Pat Toomey (R-Pa.) on a stablecoin bill, with the hope that it will be added to the general portfolio. Spending bill before the end of the year. In a recent interview with no bankToomey also mentioned two other bipartisan bills that could be passed by the end of 2022, including one “de minimis” exception to simplify the use of digital assets for smaller purchases and fix definition of “brokers” from infrastructure law 2021.

Stablecoins, a cryptocurrency pegged to an underlying asset like the U.S. dollar, have long been viewed by lawmakers as a necessary—and simpler—way of regulation.

The stablecoin bill draft from the House Financial Services Committee, sponsored by chair Maxine Waters (D-Calif.) and senior member Patrick McHenry (RN.C.), has floated year-round, though obstacles remain. concerns about key provisions including state regulators .

With a deadline on Friday and Republicans attempt to block multi-tiered bill, the chances of any crypto-terms being tied to a larger vehicle before the end of the year are dwindling. But with a shift in power in the House and McHenry becoming chairman of the House Financial Services Committee, stablecoin legislation is likely to become a major focus of lawmakers.

‘Cryptocurrency Congress’

The final missing piece of the legislative puzzle is the Digital Commodities Exchange Act, a bill proposed in the House Agriculture Committee that is similar to the DCCPA but not obscured by Bankman-Fried.

According to a person with direct knowledge of the matter, the DCEA will likely be reintroduced in the next session of Congress. Like the House Financial Services Committee, the House Agriculture Committee will signal a new crypto-focused chair, Representative Glenn Thompson (R-Pa.). With a recognizable road ahead, DCEA could become one of the top crypto bills.

Representative Ritchie Torres (DN.Y.), a second term on the House Financial Services Committee, introduced two bills his own in December to address the failures of FTX, although he will be in the minority next year.

The next session of Congress will likely include a focused push from both sides towards crypto regulation. Ron Hammond, director of government relations at the Blockchain Association, has predicted a strong boost from House Financial Services after the Republican takeover.

As many have said Luck, while the collapse of the FTX is likely to stall bills like the DCCPA, it also increases the overall need for comprehensive legislation. Whether that’s right for the crypto industry, especially when it comes to complex areas like decentralized finance, remains to be seen.

Quick said: “The 118th Congress will actually be the Cryptocurrency Congress.