The cryptocurrency industry has poured money into Washington recently, hiring top talent from the White House and Congress and spending millions on lobbying. But it’s likely to face an uphill struggle in its push for laws allowing crypto firms more flexibility, a source familiar with the matter said.
After the spectacular collapse last year of FTX, once one of the most trusted exchanges in the freewheeling industry, lawmakers are taking notice. But the response so far to the plight of digital assets has been limited to statements from politicians and a series of hearings. The industry is now trying to refocus attention with an upbeat message that it wants a legislative framework tailored to its needs.
It’s a new challenge for an industry that has worked hard to make itself a part of the financial system. While the industry is now a multitrillion-dollar business, regulators have yet to face the sector and its risks. The fall of FTX, the failure of Silvergate Capital and Signature Bank, the collapse of ICO firm Bitfinex, and many other high-profile crypto-related losses have raised concerns that the sector can be rife with fraud and market manipulation.
Amid the turmoil, several lawmakers have introduced bills to set up a regulatory framework suited for crypto. Some are Republicans, like House Financial Services Committee Chairman Patrick McHenry (R-N.C), overseeing the effort. Others are Democrats, including Sens. Kirsten Gillibrand and Sherrod Brown (D-Ohio).
Dozens of executives from digital asset companies meet with lawmakers and their staff on Wednesday as part of a grassroots advocacy campaign organized by Coinbase (COIN.O), the biggest U.S. crypto exchange. The company also promotes an online campaign for its users to urge their congressional representatives to support the legislation.
But a fight over the federal budget may overshadow the industry’s efforts. To tame the nation’s deficit, Republicans are relying on cuts and other reductions rather than raising taxes. The move could cut into funding for programs that many Americans rely on daily, such as Medicare and Social Security.
On the Senate side, Elizabeth Warren’s bill to crack down on using crypto for money laundering has gained nine cosponsors. It is supported by Democratic members from the Banking, Commerce, and Judiciary committees, including Gary Peters, Dick Durbin, Michael Benham, Tina Smith, Angus King, Jeanne Shaheen, Richard Blumenthal, and Catherine Cortez Masto. But in the House, a bill hasn’t gained much traction. The effort is hampered by disagreements about what regulations are needed, whether a new law should be enacted, or if current enforcement should continue. A source close to the issue said that House leaders are still working through their bill options and don’t expect a final vote this week or next. That means it will be a while before Congress can consider any measures to rein in the industry.