A major legislative proposal aimed at revamping the regulations surrounding cryptocurrency has caused a rift among senior Congressional Democrats, opening up an opportunity for Republicans to advance their own legislation with some potential bipartisan support.
During a recent meeting of the Financial Services Committee, House Democrats showed their divided stance on a Republican-led measure that seeks to establish federal mandates for regulating digital asset trading, specifically overseen by the CFTC and the SEC. Representative Maxine Waters, who is the top Democrat on the committee, vigorously criticized this bill, saying it’s a wish list favoring major players in the crypto industry. She urged fellow legislators to denounce it.
However, Representative Jim Himes broke ranks with Waters and expressed his support for this proposal after protracted bipartisan negotiations. This suggests that a few Democrats may eventually vote in favor of the bill when it comes up for a committee vote.
The conflict highlights the constantly evolving politics surrounding crypto policy, particularly in the aftermath of a boom-and-bust period that exposed issues of mismanagement within the industry and raised concerns about consumer protection.
Republican lawmakers responsible for drafting the legislation contend that it aims to fill gaps in existing regulations and discourage digital asset enterprises from seeking more favorable crypto-specific regulations in other countries.
The draft legislation grants the CFTC expanded jurisdiction over cryptocurrency trading, broadening its jurisdiction beyond financial derivatives and futures contracts.
Additionally, the bill seeks to explicitly grant digital asset oversight to the Securities & Exchanges Commission, an agency that has increasingly taken on a role in policing crypto-related fraud and investment law violations. However, the legislation also sets new boundaries for the agency, addressing long-standing clashes between the crypto sector and the SEC over jurisdiction.
In their bid to gain Democratic Party support, the Republicans made several tweaks to the bill, including consenting to avail additional funding to the CFTC for implementing the legislation. Yet, despite these efforts, they fell short of swaying Waters plus other crypto critics in the Democratic Party, such as Representatives Stephen Lynch and Brad Sherman.
Breaking away from Waters’ stance, Himes asserted that the current reality of cryptocurrency regulation within the U.S. lacks transparency and is plagued by chaos. Himes stated that he and his team collaborated extensively with the Republicans on the committee as well as legal experts from law firm WilmerHale to fine-tune the bill, with GOP members incorporating all of the changes he suggested.
A bipartisan voting pattern in favor of this bill could possibly give Republicans a better chance in the upper chamber of Congress, where skepticism toward crypto regulation remains high. The Senate’s focus has been primarily on combating money laundering as well as illicit activities associated with cryptocurrencies.
Republicans are hopeful that Waters could assist them pass a separate, narrower cryptocurrency bill that focuses on the regulation of stablecoin.
Crypto industry players such as Stronghold Digital Mining Inc. (NASDAQ: SDIG) are likely to follow the developments on Capitol Hill as any bills passed will help clarify the rules under which these companies operate.
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