- Influential Democratic congresswoman asks SEC chair and Janet Yellen for clarity on proposed crypto bills.
- Blockchain lobby looking for daylight between positions of top two Administration finance regulators.
Is Congress running out of patience with Gary Gensler?
Blockchain industry lobbyists are hoping that may be the case as they analyse two letters authored by Maxine Waters, the influential ranking Democratic congresswoman on the House Financial Services Committee.
If Waters is chafing at Gensler’s refusal to support legislation tailored for crypto, that could emerge as a significant issue.
“This strategy of attempting to supersede Congress is just another reason his view among Democrats is starting to slip,” Ron Hammond, the head of government relations at the Blockchain Association, an industry trade group, told DL News.
Letters to Gensler and Yellen
On June 23, Waters sent a letter to Gensler, the chair of the US Securities and Exchange Commission, and another to Janet Yellen, the Secretary of the Treasury. The message was simple — please explain the administration’s position on two proposed pieces of crypto legislation.
Normally, such missives would amount to little more than legislative housekeeping. But Waters’ request has raised eyebrows because she is focusing on an inconsistency between the Administration’s two most powerful financial regulators.
In waging his crackdown on crypto, Gensler has declared that virtually all digital assets are securities or investment contracts covered by existing federal law, so there is no need for new legislation.
But Yellen, a former chair of the Federal Reserve, supports a proposal to fashion some form of legislation to address stablecoins.
If there’s any chance such a bill might acknowledge the special technological qualities of cryptocurrencies, the industry would be overjoyed. As Brian Armstrong, the embattled CEO of Coinbase, has long argued, crypto needs its own legal regime to recognise the differences between digital assets and stock and bonds.
“It will be important which direction Waters moves after these responses [from Yellen and Gensler],” Hammond said. “We’ve already seen her choose Treasury’s side before in the context of stablecoins.”
Now Waters is asking for details on Yellen’s and Gensler’s views toward crypto. And the clock is ticking. In her letter to Yellen, Waters asked the secretary to respond by Friday with a clear statement of her position on a proposed bill co-authored by Patrick McHenry, the chair of the House Financial Services Committee.
Even though this bill is still in the earliest stages of what would be a long and challenging journey through Capitol Hill, it has drawn enormous attention from crypto supporters. This is because the bill could create a new legal regime for crypto and trump Gensler’s efforts to regulate most digital assets with TradFi rules.
Waters’ letter to Yellen asks how this so-called market structure bill might clash or complement existing Treasury policy. She asked Gensler how the bill might add to the SEC’s workload. Waters also asked Gensler to be ready to appear before her committee to explain his stance.
“Please advise whether this draft legislation or specific provisions of it are needed, and, whether there are alterations to existing law outside the bill’s scope that would promote financial stability or strengthen oversight and investor and consumer protection in the digital assets ecosystem,” Waters wrote.
This is pretty routine stuff. But it’s not so much the content of the letters that gives crypto proponents hope that Gensler might be losing control of the narrative on crypto regulation. Gensler’s refusal to cede any ground to Congress may be a tenuous position and cost him support from Democrats to support the Administration.
And Gensler’s insistence that stablecoins fall under the SEC’s jurisdiction and don’t need their own laws may be in play if Waters warms to Yellen’s approach. Indeed, when the Biden Administration in 2022 released its crypto policy guidelines a working group chaired by Yellen urged Congress to act on stablecoins before regulators did.
‘This strategy of attempting to supersede Congress is just another reason his view among Democrats is starting to slip.’— Ron Hammond
Waters herself was hammering out draft stablecoin legislation with McHenry when Gensler’s SEC initiated an intense crackdown on crypto businesses, culminating with lawsuits against Coinbase and Binance.
Other crypto lobbyists on the Hill said Waters may be simply seeking clarity on the market structure bill so she can make recommendations on amendments. McHenry wants to advance it through the committee in mid-July.
Waters testified at a hearing this month that “any bill that would so dramatically overhaul our nation’s capital markets must be worked on collaboratively with the minority [Democrats].”
“We also need the analysis and views of our independent regulators, the administration and stakeholders on the implication of this legislation,” she said.
Waters added that she was concerned the bill would allow firms like Binance that are currently the subject of multiple lawsuits to continue trading in the US under provisional registration.
And she echoed Gensler’s position that companies have a clear path to registration under existing federal laws.
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