Senate Committees Jockey for Position on Digital Asset Regulation

Bipartisan legislation introduced last week for regulating digital assets is weighted too heavily in favor of industry, Senate Banking Committee Chairman Sherrod Brown, D-Ohio, told us Thursday. Various committees are jockeying for position to define digital asset markets, which have drawn White House attention (see 2203090072).

Sens. Kirsten Gillibrand, D-N.Y., and Cynthia Lummis, R-Wyo., introduced the Responsible Financial Innovation Act June 7. They called it the “most substantial and comprehensive bipartisan effort to provide certainty and clarity to the growing digital asset and blockchain industries.” The bill would define certain digital assets as commodities and securities, would create a taxation structure, grant regulatory authority to the Commodity Futures Trading Commission and establish disclosure requirements for stablecoins. The CFTC and the SEC would be directed to consult the Treasury Department and the National Institute of Standards and Technology on developing “comprehensive, principles-based guidance” for digital asset intermediary cybersecurity.

At least four committees have potential jurisdiction over the legislation, Lummis told us: Banking, Agriculture, Finance and Intelligence. She’s eager for Agriculture to take up the bill and hold another hearing on the topic. Brown isn’t concerned about jurisdictional issues: “I’m not so much into jurisdiction fighting as some of my colleagues because there’s plenty to do here.” Banking is focused on the SEC and deciding what the agency needs to provide oversight. Brown welcomed the bill’s introduction but said it needs to be stronger. He supports SEC regulators taking an “aggressive” approach when it comes to digital assets.

“Industry is pretty uniform in the sense that they want some regulation,” Senate Agriculture Committee ranking member John Boozman, R-Ark., told us. “The question is how much, where the regulation’s going to be.” He’s working on a separate proposal with Agriculture Chair Debbie Stabenow, D-Mich., and is consulting with industry.

Sen. Mike Crapo, R-Idaho, a Banking member and former chair, said he plans to do a “deep dive” on the Gillibrand-Lummis bill. He wants to evaluate whether “there should be no regulation or whether there should be highly intense regulation.” It could be “something in the middle,” he said. Congress should discuss whether existing regulators can handle digital asset markets or whether a new regulator should be created, said Crapo. Most jurisdiction will fall on the Banking Committee, said Brown. Sen. John Kennedy, R-La., hopes Banking holds a hearing on the topic. “It’s going to require some homework,” he said. “It’s complicated stuff, but the two bill authors know a lot about it, and I plan on sitting down and talking with them.”

House members raised questions Thursday about the role of Congress in providing digital asset oversight. There isn’t consensus on that, or even a baseline understanding of the technology, said House Intelligence Subcommittee Chair Elissa Slotkin, D-Mich. She and Rep. Dusty Johnson, R-S.D., introduced the Cryptocurrency Accountability Act. HR-7862 requires members of Congress to disclose all cryptocurrency holdings and trades, similar to requirements for stock trading. That aspect is one issue, as well as government partnerships with industry for combating terror financing and ransomware payments, she said. Regulation shouldn’t be implemented “hastily,” said ranking member August Pfluger, R-Texas. He lauded efforts from Lummis and Gillibrand but said Congress should pursue the “least burdensome regulatory path,” while ensuring safety and security.