The regulatory legislation supported by embattled former FTX CEO Sam Bankman-Fried will be back in the spotlight during the first congressional hearing on FTX’s collapse.
Though the Senate bill’s authors have pledged to push forward on the bill, to create guardrails for U.S. consumers against crypto collapses similar to FTX’s, other senators aren’t sure about moving forward with the Digital Commodities Consumer Protection Act.
The bill, which was a major topic during Bankman-Fried’s numerous visits to Washington over the last several months, will be a major topic of conversation during today’s hearing, as its other major proponent — Commodity Futures Trading Commission Chair Rostin Behnam — testifies before the committee again on the topic. The agency head previewed a defense of the bill earlier this week during a public interview.
”I think it’s important that we fill this regulatory gap before more harm is done to retail investors and institutional investors as well,” Behnam told a Financial Times crypto asset conference.
But despite the spotlight, one of the senators writing the legislation acknowledged that the bill would not move until next year, due to the realities of the congressional calendar, complexity of the subject matter, and strong debate around the legislation.
“I don’t think it’s going to happen this year,” said Sen. John Boozman, R-Ark., the top Republican on the Senate Agriculture Committee and co-author of the bill with Senate Agriculture Chair Debbie Stabenow, D-Mich. Boozman told reporters that, “this process is long and arduous, which it should be, to get a good product.”
Boozman added that the committee wanted to advance the bill “a few months ago,” but acknowledged that, “we couldn’t get agreement amongst all the stakeholders.”
The bill divided representatives for digital asset companies and projects, with decentralized finance advocates in Washington (and online) fiercely opposed. The division turned toward hostility for Bankman-Fried, who was the loudest industry advocate for the DCCPA. Industry or individual opponents argued the legislation would create regulatory moats for decentralized projects, because it would create a framework for centralized crypto exchanges.
The FTX implosion has outspoken proponents of stronger financial regulations in the Senate criticizing the bill from the opposite direction, and saying that the Senate should hit pause.
Senate Banking Committee Chair Sherrod Brown, D-Ohio, who sits on the Agriculture Committee told The Block that he believes the legislation should be paused, and that Stabenow knows his view on the matter.
“This bill leans too much to the industry,” elaborated Brown. “The industry has betrayed the American public, not to mention, all the ways cryptos are jeopardizing national security with what they’ve done,” Brown continued, citing sanctions evasion. “Congress weighing in is fine, but not with the bill that the industry helped write.”
Sen. Elizabeth Warren, D-Mass., the Senate’s biggest financial regulatory hawk, argued that the CFTC wasn’t the right regulator for an everyday investor product.
“The CFTC has no experience in investor protection,” said Warren, “which makes them the worst possible candidate for regulating a financial product that has been used to rip off millions of people.”
The Massachusetts Democrat disagreed when asked if Bankman-Fried’s lobbying in favor of the bill colored her perception of it.
“That’s what the content is, and the content is not the direction we should go.”
Many cooks, with more coming
Though there’s agreement in both parties in Congress, as well as senior regulators and policymakers in the Biden administration that more laws are needed around digital assets, achieving consensus as to what new rules should look like remains far from happening.
“That’s part of the reason we haven’t marked up,” Boozman said, referring to when a committee debates amendments and final language in a bill before it. “We’re working with all the stakeholders,” including the Senate Banking Committee, the Arkansas Republican said.
More urgency — and attention — around crypto regulations will also attract more ideas, potentially complicating an already busy picture even further.
Brown demurred when asked if he would author his own bill, though he sent a letter to the Treasury Department earlier Wednesday saying that he looked forward to working on legislative recommendations made by regulators last month, prior to the FTX collapse. Portions of the report making those regulations flagged concerns over companies with “integrated” structures, like FTX’s broad-reaching corporate affiliations — most of which are now in bankruptcy court.
The Biden administration has had a seat at the table negotiating a stablecoins bill in the House of Representatives, but the bipartisan effort hit an impasse that incoming-House Financial Services Committee Chair Patrick McHenry, R-N.C., blamed on administration officials.
Asked if she was working on her own crypto bill, Warren left the possibility open, though vague.
“We’re working in the area,” she told reporters.
Kollen Post contributed to this report.
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