House Financial Services Committee Passes Crypto Bills

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  • The House Financial Services Committee has advanced a set of crypto bills after a landmark markup
  • Lawmakers have voted in favor of H.R. 4763 and H.R. 1747, referring both bills to the full House of Representatives for a vote
  • Concerns have been raised about the bills’ provisions, but Republicans have praised the potential clarity they could bring to the crypto industry

In a significant development for the cryptocurrency industry, the House Financial Services Committee successfully advanced a set of crypto bills on Wednesday after a landmark markup session. The session focused on fine-tuning the bills’ details to establish a unified legal framework for cryptocurrencies and address blockchain-related concerns, although the collapse of FTX last year cast a shadow over the session. The legislation’s approval marks a crucial step in providing much-needed clarity and regulation to the rapidly evolving digital asset market.

Day-long Session Sees Both Bills Move Forward

Despite the occasionally frosty discussions, most committee members, including Republicans and Democrats, eventually rallied in favor of H.R. 4763, known as the Financial Innovation and Technology for the 21st Century Act, and H.R. 1747, the Blockchain Regulatory Certainty Act. 

During the markup, a contentious clause in the market structure bill came under fire. The clause proposed granting more power to the Commodity Futures Trading Commission (CFTC), prompting concerns from lawmakers about potential implications for consumer protections established by long-standing securities laws. Critics were worried that the bill might leave U.S. investors with fewer safeguards against fraud, safeguards that would be in place should the Securities and Exchange Commission (SEC) oversee the sector.

Opposition on Both Sides

The session saw arguments on both sides from both parties. The committee’s chair, Rep. Patrick McHenry, expressed enthusiasm for the legislation, emphasizing that the U.S. must not fall behind other countries in regulating the crypto market. He stated that the comprehensive digital asset market structure legislation recognizes the distinction between digital assets that are inherently securities and those offered as part of an investment contract without being classified as securities.

Despite Rep. McHenry’s praise, the bill’s opponents raised substantive objections to its provisions. Democrat Rep. Stephen Lynch strongly criticized the bill, labeling it the worst legislation he had seen in his 20 years on the committee. Democrats particularly objected to granting the CFTC additional regulatory authority without an increase in funding, fearing it could lead to a lenient approach towards crypto companies and enable future fraudulent activities.

Republicans supporting the bill argued that recent approval of an additional $120 million in funding for the CFTC by the Agriculture Committee would empower the agency to regulate the digital assets space more effectively. They also highlighted the potential clarity the bill could bring to the crypto industry, countering what they described as the Securities and Exchange Commission’s (SEC) aggressive crackdown on digital assets, which could prompt companies to leave the U.S. for more crypto-friendly jurisdictions.

Following the day-long markup session, both bills were referred to the full House of Representatives for a vote.

Senate Taking Action Too

As the House Agriculture Committee gears up to start its own markup of the Financial Innovation and Technology for the 21st Century Act, the Senate has also taken action, incorporating anti-money laundering provisions for the crypto industry into a must-pass defense bill. The provisions mandate the creation of a risk-focused examination and review process for financial institutions to assess specific crypto-related risks, including compliance with anti-money laundering programs and adherence to the law.

Furthermore, the Senate’s amendment requires the Treasury Department to conduct a comprehensive analysis of cryptocurrency mixers and privacy-enhancing technologies used in connection with crypto assets. Recommendations for any necessary legislation to address concerns arising from the study will also be included.

With the House committee’s endorsement and the Senate’s inclusion of anti-money laundering provisions, the crypto bills are now set to undergo further scrutiny and debate as they progress through the legislative process. The outcome of these deliberations will have significant implications for the crypto industry and its future growth within the United States.