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Monday, April 15, 2024

The US Congress Is Starting to Question This Whole Crypto Thing

Hundreds of thousands of investors just had billions picked from their collective e-pockets. Yet, crypto remains the untouchable queen in the antiquated marble halls of the US Capitol.

Sure, a handful of lawmakers are waving—or at least limply holding—red flags after cryptocurrency exchange FTX imploded earlier this month. Even as hundreds of millions of dollars worth of happiness, retirements, and even basic health care were erased in the blink of a bro’s cunning eye, Congress is cool, calm, and collectively, well, daft.  

“It’s not really an issue I know a whole lot about,” says Bernie Sanders, the independent US senator from Vermont who plays a Democrat every four years.

“I don’t really understand the technology,” says US senator Josh Hawley, a tech-forward Missouri Republican.

House Democratic leaders seem to be on the same (if antiquated) page. Asked about plans to address the volatile cryptocurrency world following the collapse of FTX, US representative Hakeem Jeffries (D-New York), the current chair of the House Democratic Caucus and (presumed) future leader of House Democrats, demures. “Well, I think, that’s an issue that, I presume, will be taken up by the Financial Services Committee,” he says.

Talking with lawmakers, it seems Congress continues to wrestle with the definition of what “money” is, even as most of us have moved far past the nation’s representatives and keep asking when we’re going to get our money—digital or otherwise—back. And despite the current crypto collapse, according to Jeffries and many other powerful party leaders, there’s time to kill.

“There are a whole host of issues that, I think, we are planning on working through, and I can imagine that the situation related to the cryptocurrency industry will be one of them moving forward,” Jeffries adds. 

According to US senator Cynthia Lummis (R-Wyoming), the rise of cryptocurrencies—and the dangers that come with them—caught Congress by surprise. 

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“I think that a lot of members of Congress have assumed that the digital asset industry could be on the back burner because it’s immature,” Lummis says. “It’s growing faster than people recognize. And now with Elon Musk announcing that he might use Twitter as a payment platform, I mean, this industry is much more mature than people realize. It’s time. It’s time to regulate. It’s time to put sideboards on this.”

Lummis isn’t merely a Republican. She’s Wyoming—a state that aims to be the “crypto capital” of the US. She was a founding member of the House Freedom Caucus. Like the caucus itself, she moved toward MAGA in recent years, but her libertarian streaks remain pronounced—and crypto’s the best thing since sliced bars of gold for the laissez-faire Lummises of the world.

As anti-regulation as Lummis is, she’s been out in front calling for constraints—“regulations,” even, though that’s still considered a four-letter word in most Republican circles. She wants bumpers, at the very least.

“There will still be companies that deal in digital assets that will fail even after they’re regulated, but at least we’ll have consumer protections and reporting—and the most important thing there is segregating the customers’ assets from the financial institution’s assets,” Lummis says. “What happened with FTX is they were lending out customer’s assets.”

This summer, the libertarian Lummis teamed up with liberal US senator Kirsten Gillibrand (D-New York) to drop the Responsible Financial Innovation Act, which promises “a complete regulatory framework for digital assets.”

It seeks, for instance, to draw a line between securities and commodities, giving the Commodity Futures Trading Commission (CFTC) more power to regulate cryptocurrencies. It also would establish an advisory committee to help lawmakers and regulators streamline this ever-evolving and perpetually confusing new world of digital currency.

“The industry wants regulation because they want to be able to separate out the wheat from the chaff,” Gillibrand says. “They want to be able to make sure those who are fraudulent are not allowed to participate in the market.”

In recent decades, Congress has dithered and failed to pass a comprehensive law protecting Americans’ digital assets—including our private secrets, like, say, our reproductive decisions—even as both parties have called for upending America’s digital norms. The Senate only recently learned that the most popular apps—from Facebook to YouTube—survive on ad money. Some members of Congress—I’m lookin’ at you, Chuck Schumer—still use flip phones. That’s likely why this is no crypto Congress, even as anti-regulatory forces abound from Bernie Sanders’ right to Donald Trump’s left.

“It’s a very volatile marketplace,” says US senator Rand Paul. “I think most people investing in it know that.” The Kentucky Republican, bearish on government regulation, is one of the few US lawmakers who’s truly in the crypto weeds.

“I’m still fascinated by some things that have not yet happened there that might. I think someday there might be a role for stable coin—where there’s an actual backing to the coin—to maybe compete with credit cards and be another form of exchange of transaction,” Paul adds. “The government doesn’t do a very good job regulating anything; it usually makes it worse.”

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While some lawmakers are all in on crypto, others are dubious.

“Crypto fortunes are smoke and mirrors. Built on a lot of corruption and insider dealing,” US senator Elizabeth Warren (D-Massachusetts) says. “We’ve needed regulation for a very long time, but Congress has been frozen in acting.”

To Warren, what’s needed is “comprehensive legislation that is not written by the authorities themselves. It is important that the regulators have the tools they need to keep not just this kind of problem from happening, the one that’s just happened in FTX, but other kinds of fraud and deception.”

For US senator Cory Booker (D-New Jersey), the issue is white and Black. “Crypto is something where Blacks are overrepresented, people without college degrees are overrepresented,” Booker says. The Democrat comes at it from a consumer standpoint, even as Lummis does as well. But New Jersey is no Wyoming. Ultimately, though, location doesn’t matter. Anyone anywhere can invest in crypto—even as anyone anywhere can lose everything in crypto. That’s impossible with American banks, which is why these lawmakers are demanding a minimum.

“We need to have a base,” Lummis says. “There has to be a floor, and then, as time goes on, if things get over-regulated and we’re sacrificing innovation because of it, we can cross that bridge when we come to it.”

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