House Republicans move to regulate crypto with new subcommittee

Republican lawmakers announced late Thursday the launch of a new subcommittee to oversee the crypto and fintech industry, the first of its kind in the United States, after a turbulent period for digital currencies.

French Hill of Arkansas will chair the Subcommittee on Digital Assets, Financial Technology and Inclusion, which will be part of the House Financial Services Committee.

Hill, who was also named vice chair of the broader committee, said in a statement that a bipartisan effort is needed for “FinTech innovation to flourish safely and effectively in the United States.”

The unregulated nature of the crypto industry emerged as a pressing concern late last year following the November collapse of crypto exchange FTX. Sam Bankman-Fried, FTX’s founder, was arrested last month on fraud charges and was released on $250 million bond pending trial.

Hill has been an enthusiastic supporter of the crypto industry. In 2021, he co-sponsored the Central Bank Digital Currency (CBDC) Study Act and said at the time that it is “important for the Federal Reserve not to delay its important work” on a potential CBDC.

In 2019, well before FTX became a household name, Hill signed a letter urging the IRS to refine the tax guidance for cryptocurrency users.

“Ambiguity prevents appropriate tax compliance,” the letter said.

Other Republican crypto advocates in Congress have included Representative Tom Emmer of Minnesota and Senator Cynthia Lummis of Wyoming.

Although Bankman-Fried operated out of the Bahamas, he was a skilled Washington operative, forging relationships with heavyweights such as Rep. Maxine Waters, (D-Calif.) and Rostin Benham, Chairman of the Commodity Futures Trading Commission. In the 2022 midterm races, Bankman-Fried made nearly $40 million in publicly disclosed contributions, mostly to Democrats. He and his associates donated to politicians on both sides of the aisle.

Federal regulators have alleged that Bankman-Fried committed felony campaign finance violations while running an $8 billion fraud.

FTX’s collapse and Bankman-Fried’s subsequent indictment have given Republicans like Emmer plenty of fodder to criticize the regulators’ work. Emmer described actions taken by Securities and Exchange Commission Chairman Gary Gensler as “haphazard and unfocused.”

Senate Democrats, meanwhile, have already begun preparing their own efforts to oversee the crypto industry and dictate enforcement actions.

The SEC has stepped up its activity level since FTX went bankrupt. The commission charged crypto lender Genesis and crypto exchange Gemini with unregistered sales and offerings of securities on Thursday, the same day Hill announced the subcommittee.

SEE: Bitcoin Hits $19,000, SEC Charges Gemini and Genesis