Blockchain
GOP organizes cryptocurrency vote with hopes of Democratic support
The House of Representatives is drafting a cryptocurrency bill developed by the House Financial Services and Agriculture Committees that would outline whether the Securities and Exchange Commission or the Commodity Futures Trading Commission would oversee different crypto tokens, as well as prevent the SEC from issue rules on the custody of cryptocurrencies.
Bloomberg News
WASHINGTON — The House will vote on one of these signing crypto bills on Wednesdaya significant step forward after months of effort by Republicans on the House Financial Services Committee who hoped to make a cryptocurrency regulatory framework a hallmark of their time leading the committee.
The text of the bill, which was debated by the House Financial Services Committee and the House Agriculture Committee, is largely concerned with delineating authorities between the Securities and Exchange Commission and the Commodity Futures Trading Commission , and establishes a criterion by which agencies can determine which of them would oversee various digital assets.
But, importantly for banks, it would be prohibit the SEC from regulating cryptocurrency custody arrangementsas banks have complained that the agency has effectively banned it in its Personnel Accounting Bulletin 121.
Specifically, the bill would prevent the SEC from requiring or taking any supervisory action that causes a bank to record a cryptoasset held in trust on the institution’s balance sheet “except for cash held on behalf of others by such institution that is commingled with the general assets of that institution.” This would also prevent the SEC from requiring banks to hold additional regulatory capital against assets in custody or custody.
Zachary Zweihorn, a partner at law firm Davis Polk, said the bill would create much-needed legislative certainty on at least some aspects of the cryptocurrency market and give banks a clear basis to become service providers for that sector.
“On the supervisory side, banking regulators have been hesitant about banks engaging in digital asset activities, given the regulatory uncertainties and risks inherent in the market,” Zweihorn said. “Passing a comprehensive federal regulatory regime for digital asset activities could reduce the risks that regulators see as presented by the industry, ultimately making them more comfortable with this asset class.”
Rep. French Hill, R-Ark., a major sponsor of the legislation, said in an interview that banking regulators sought clarity in the legislation after the SEC did not consult them before issuing the accounting bulletin.
“Staff Accounting Bulletin 121 on custody that was not reviewed by banking regulators, was not reviewed by Treasury and was not consulted with anyone and actually took custody completely in the wrong direction,” Hill said. “Not consistent with custody rules that have been in place for a long time.
“Banking regulators have sought clarity here for custody,” he added.
The legislation is getting a last-minute boost from a surprisingly helpful Democratic contingent. While Democratic leaders on the House Financial Services Committee, including Reps. Maxine Waters of California and Stephen Lynch of Massachusetts, oppose the legislation because it applies too light an approach to the cryptocurrency industry, Democratic leadership isn’t lashing out. the legislation.
This means that party leadership is not pressuring Democrats to vote along party lines, and there may be significant numbers who choose to support Republican bills.
While President Joe Biden has vowed to veto Congressional Review Act legislation, the cryptocurrency law voted on Wednesday would also effectively cancel the bulletin.
Most Democrats voted against the measure in the Senate, but the vote nevertheless predicts a growing willingness among Democratic legislators, especially in view of the elections, to take cryptocurrencies into consideration, even the most permissive ones.
A senior committee staffer involved in drafting the bill told reporters that the bill’s authors, including Reps. Patrick McHenry, R-N.C., chairman of the House Financial Services Committee, and French Hill, chair of the Subcommittee on Digital Assets and Financial Technology and the potential future Republican at the top of the entire panel, are hoping that the Senate will see Democratic votes in the House votes and that that will push them to negotiate on the legislation.
With the renewed possibility that a crypto structure bill will pass on a bipartisan basis, a group of critics, including consumer groups and prominent banking law professors, have released a statement outlining the deeper financial stability concerns related to the bill.
Specifically regarding banks, the coalition, which includes progressive groups such as Americans for Financial Reform, the National Consumer Law Center, the National Community Reinvestment Coalition and Public Citizen, said the bill could allow institutions such as banks to bypass regulation.
“Not only could the aforementioned decentralization framework allow crypto firms to largely continue with dangerous business practices as usual, but it could also allow traditional financial firms to evade stronger regulatory oversight by claiming that their products and platforms meet this decentralization rubric and are therefore exempt from conventional regulatory requirements for securities issuers and actors,” the coalition said in the letter to House leadership. “This would create enormous potential risks for consumers, investors and markets due to less rigorous oversight than they would otherwise see with traditional regulatory approaches.”