(The Hill) – Senators agree on the need for comprehensive crypto regulation, but they don’t appear to have a clear pathway to bipartisan legislation.
At a Senate Banking Hearing on Tuesday, Democrats expressed doubt about the value of crypto, while Republicans pushed for a more industry-friendly regulatory environment that encourages crypto firms to set up shop in the U.S.
Partisan differences over how to regulate crypto reduce the chance that Congress will pass a comprehensive bill anytime soon, despite the high-profile collapse of FTX and numerous other crypto firms that weren’t subject to major consumer protection and financial transparency rules.
Sen. Sherrod Brown (D-Ohio), the committee’s chairman, said that Congress should focus on legislation to protect consumers and ensure that crypto doesn’t become integrated into the broader financial system, citing the recent failures.
“The lessons learned here are the product of hard-earned experience — experience that is born of real people losing real money and of dreams shattered,” Brown said.
Sen. Tim Scott (R-S.C.), the committee’s ranking member, said that regulators aren’t being clear about whether they have the authority to properly regulate crypto assets, adding that Securities and Exchange Commission (SEC) Chairman Gary Gensler must testify before the committee soon.
He also blamed the SEC for a failure to implement clear guidance that may have pushed firms like FTX to operate outside of the U.S., a talking point often repeated by the crypto industry.
“The American people deserve to know why no action was taken prior to FTX’s collapse and how millions of dollars of Americans’ hard-earned money just vanished into nothing,” Scott said.
Senators don’t appear close to a comprehensive bill to regulate the crypto industry. The first bipartisan proposal to regulate crypto, introduced last year, was written with the help of disgraced FTX CEO Sam Bankman-Fried, dooming its chances.
Still, senators floated the possibility of smaller bills to fill regulatory gaps.
Sen. Thom Tillis (R-N.C.) said he is pushing for a bill to require crypto companies to show proof of reserves, noting that a comprehensive framework is “not likely to occur.”
Sen. Elizabeth Warren (D-Mass.), a leading critic of the crypto industry, is working with Sen. Roger Marshall (R-Kan.) on a bill to subject crypto to anti-money laundering rules.
“Big-time financial criminals love crypto,” Warren said Tuesday, noting that it’s the currency of choice for ransomware gangs and hackers in North Korea and Russia.
Crypto’s market cap is sitting right around $1 trillion, down from its peak of $3 trillion in November 2021.
The industry is coming under threat from state and federal regulators. New York regulators on Monday ordered blockchain firm Paxos to stop issuing a major so-called stablecoin that is tied to the U.S. dollar.