WASHINGTON – After 13 years, at least three crashes, dozens of scams and Ponzi schemes, and hundreds of billions of dollars made and evaporated, cryptocurrencies finally have the full attention of Congress, whose lawmakers and lobbyists have briefed Capitol Hill with proposals on how to regulate them . the industry.
The latest cross-party proposal came on Wednesday from Sens. Debbie Stabenow, D-Mich., and John Boozman, R-Ark. It would leave regulatory authority over Bitcoin and Ether to the Commodities Futures Trading Commission. Stabenow and Boozman chair the Senate Agriculture Committee, which has authority over the CTFC.
Bills proposed by other members of Congress and consumer advocates have proposed giving authority to the Securities and Exchange Commission.
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This year, crypto investors have seen prices plummet and companies crater with fortunes and jobs disappear overnight, and some firms have been accused by federal regulators of running an illegal securities exchange. Bitcoin, the largest digital asset, is trading at a fraction of its all-time high, down from more than $68,000 in November 2021 to around $23,000 on Wednesday.
While cryptocurrencies have crashed before, most recently in 2018, this crash has been broader and more systemic. A major hedge fund filed for bankruptcy earlier this summer, which in turn has caused other cryptocurrency brokers to collapse as well. Some crypto brokers have falsely claimed that their clients’ deposits are backed by deposit insurance, like banks.
Lawmakers, having run out of patience with the cryptocurrency industry’s attempts to live out an unregulated Libertarian, bank-free world, are now desperate to implement strict oversight. The industry spent $9 million in 2021 on lobbying fees, according to a report by Public Citizen, a number that is sure to be higher with all the congressional proposals this year.
The Stabenow-Boozman bill would be a victory for the cryptocurrency industry, which sees the CFTC as a more industry-friendly regulator than the SEC. The CFTC, which had a budget last year of $304 million with roughly 666 employees, is a fraction of the size of the SEC, which had a budget of nearly $2 billion and 4,500 full-time employees.
“(The cryptocurrency industry) is trying to get someone other than the SEC to regulate them,” said Cory Klippsten, CEO of Swan Bitcoin. While a proponent of Bitcoin, Klippsten is deeply skeptical of much of the broader crypto industry, which has produced a myriad of tokens and other coins that he considers nothing more than scams.
Cryptocurrency billionaire Sam Bankman-Fried, who has donated millions of dollars to mostly Democratic candidates and super PACs, tweeted his support for the Stabenow-Boozman bill.
Boozman said in a call with reporters that the industry’s preferred choice to regulate crypto is the CFTC.
“They’re pretty united about this,” he said.
In a press conference, Stabenow and Boozman both acknowledged that while they believe the CFTC is up to the task of regulating cryptocurrencies, the agency would need support. The CFTC already oversees futures contracts for Bitcoin and Etherium, and the bill seeks to alleviate staffing issues by imposing user fees on the crypto industry. These funds, in turn, will fund more robust oversight of the industry by the CFTC. The bill would leave crypto-like products, such as tokens or non-fungible tokens (NFTs), for the SEC to potentially assert its regulatory authority.
“Obviously, if the CTFC is going to move aggressively in this area, they’re going to need more resources,” Stabenow said.
There has been a growing list of proposals coming out of Congress this year that variously try to solve the problems in the cryptocurrency industry. Sen. Pat Toomey, R-Pa., in April introduced legislation, called the Stablecoin TRUST Act, that would create a framework to regulate stablecoins, which have suffered huge losses this year. Stablecoins are a type of cryptocurrency tied to a specific value, usually the US dollar, another currency or gold.
In June, Sens. Kirsten Gillibrand, DN.Y., and Cynthia Lummis, R-Wyo., a sweeping bill called the Responsible Financial Innovation Act. That bill proposed legal definitions of digital assets and virtual currencies; will require the IRS to adopt guidance on seller acceptance of digital assets and charitable contributions; and will distinguish between digital assets that are raw materials and those that are securities, which has not been done.
Sens. Cory Booker, DN.J., and John Thune, RS.D., are also co-sponsors of the Stabenow-Boozman bill. Along with the Toomey legislation and the Lummis-Gillibrand legislation, a proposal is being drafted in the House Financial Services Committee, although those negotiations have stalled.
Committee Chairwoman Maxine Waters, D-Calif., said last month that while she, top Republican Rep. Patrick McHenry of North Carolina and Treasury Secretary Janet Yellen had made significant progress toward an agreement on the legislation, “unfortunately, we’re not there yet, and so will continue our negotiations during the August holidays.”
President Joe Biden’s Financial Markets Task Force released a report last November urging Congress to pass legislation that would regulate stablecoins, and Biden issued an executive order earlier this year urging a number of agencies to look at ways to regulate digital assets .
