Progressive watchdogs slam McHenry’s crypto bill as a cure worse than the ‘disease’

The crypto industry is rampant with scandals, fraud and theft that have cost people billions of dollars.

That is according to an open letter inked by a coalition of 18 left-leaning consumer protection groups and sent to DC lawmakers, warning that a crypto bill making its way through congress would only exacerbate matters.

The letter, dated July 11, said the bill will weaken regulatory scrutiny, give agencies more responsibilities but not more funding, enable Wall Street “to evade more rigorous oversight” by using new decentralised definitions that would also “allow crypto firms to largely continue with business as usual,” and make it easier for smaller crypto scams to fly under the radar.

The 162-page H.R. ____, Digital Asset Market Structure Discussion Draft bill was announced in April and released in June by Republican lawmakers Patrick McHenry and Glenn Thompson.

While pitched as a way to provide regulatory clarity and strengthen the US crypto industry, industry watchdogs warn the draft bill will “weaken consumer and investor protections for both traditional and crypto investors.”

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The letter signatories included the Consumer Federation of America; the Public Citizen think tank; the economic justice and racial equity advocacy group the Woodstock institute; the corporate accountability lobby group American Economic Liberties Project; and Americans for Financial Reform, which has lobbied for stricter regulation of Wall Street.

A cure worse than the disease

The coalition objected to how the bill aims to introduce “innovation” as a criterion for how the US Securities and Exchange Commission evaluate new securities.

“This is a dangerous approach,” the letter said, noting that it “would likely be weaponised (much like cost-benefit analyses are now) to hamstring SEC rulemaking processes and weaken the agency’s authority over all securities investors and markets.”

The signatories also criticised how the SEC would only have 30 days to classify a new digital asset as either a security or a commodity, slamming it as an “unreasonable timeline” that “stacks the deck against the appropriate securities regulation of crypto assets.”

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The letter objected to the bill making the Commodity Futures Trading Commission a regulator of crypto spot markets, but without granting it more resources.

The letter slammed proposals exempting crypto assets deemed as securities whose sales are under $75 million a year, saying “numerous crypto scams, and pump and dump schemes have successfully fleeced crypto consumers with sales volumes of far less.”

“All told, we believe this bill as written introduces a policy ‘cure’ that would be far worse than the disease and create significant harm within and far beyond the crypto industry,” the letter concluded.

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