November 30, 2023
Analysis-US crypto industry comes to Washington, but faces uphill battle

by Hannah Lang

(Reuters) – Crypto companies are descending on Capitol Hill on Wednesday, but their effort to push industry-friendly legislation is likely to be hit by a fight over the federal budget and Senate action on the use of crypto for money laundering. .

Executives from dozens of digital asset companies are meeting with lawmakers and their staff on Wednesday as part of a grassroots advocacy campaign organized by Coinbase, the largest U.S. crypto exchange, and Stand With Crypto, a nonprofit founded by it.

The House Financial Services Committee passed two key bills in July that will help provide clarity on which existing financial regulations apply to the industry, and crypto lobbyists hope to push them through Congress to lawmakers. Can convince.

But with lawmakers focused on avoiding the government shutdown and other competing bills to be passed this year, including the Farm Bill and the National Defense Authorization Act (NDAA), the industry may struggle to make itself heard.

“The number of competitive sectors is staggering, but… we need to be at the table,” said Catherine Dowling, general counsel and chief compliance officer at Bitwise, a crypto investment manager. The company is one of several pressuring the U.S. Securities and Exchange Commission to approve a spot bitcoin exchange-traded fund.

Crypto companies are expanding in Washington to combat growing regulatory scrutiny, particularly from the SEC, which says the industry is violating its rules. The lobbying increased after the SEC sued Coinbase and its rival Binance in June for allegedly failing to register the token, claims they deny.

New data provided to Reuters by OpenSecrets shows the industry spent nearly $13 million on federal lobbying in the first half of 2023, putting it on track for another record year after spending $21.6 million in 2022 . Coinbase led the pack with $1.4 million.

The crypto delegation on Wednesday includes Coinbase CEO Brian Armstrong, who is meeting with Democrats and Republicans in both houses of Congress, a spokeswoman said. It also includes an executive from top non-fungible token marketplace, OpenSea.

“Everyone wants to make sure that what they’re doing isn’t going to be wiped out by the government,” said Cara Calvert, head of U.S. policy at Coinbase, referring to the crypto industry.

An OpenSea spokesperson said the company is excited that policymakers have taken interest in NFTs, and is “hopeful that a collaborative approach to regulation” will foster innovation and protect users.

Coinbase also launched a media campaign this month that will include ads and calls-to-action on its own platform to crypto users in Washington urging its members of Congress to pass crypto legislation.

The outcome is uncertain, said Mark Hayes, senior policy analyst at Americans for Financial Reform and Demand Progress.

“It’s not clear to me that the industry’s efforts to launch a crypto grassroots campaign are going to translate into something that is politically impactful.”

‘The last thing we need’

The July bill would define whether a cryptocurrency is a security or commodity, thereby curtailing the SEC’s authority. Another bill would create federal regulations for stablecoins, which are tokens tied to traditional assets.

The next step is to consider bills introduced by the full House or in the Senate. A vote in the House is possible before the end of the year, but chances are slim in the Senate, where industry-friendly crypto bills have failed to gain popularity.

Instead, both sides of the aisle are focusing on curbing the use of crypto in money laundering and terrorist financing. In July the Senate passed its version of the NDAA, which included an amendment increasing scrutiny of anonymous crypto transactions.

And Senate Banking Committee Chairman Sherrod Brown of Ohio has shown little interest in prioritizing moving the House bills forward.

“The last thing we need is for the crypto industry to write its own rule book – too many Ohioans have been burned by fraud and scams,” Brown said in a statement to Reuters.

“We need a framework of rules for crypto that protects our economy and protects Ohioans’ hard-earned money.”

Still, Coinbase is stepping up its efforts in Ohio, where Brown faces re-election next year, with grassroots events raising awareness of the industry’s role in the local economy.

Without Brown’s support, industry-backed crypto legislation is unlikely in the near term, said Ian Katz, managing director at policy research firm Capital Alpha Partners. “If it doesn’t feel urgent, and the chair of the relevant committee isn’t involved, it’s hard to see it happening.”

(Reporting by Hannah Lang in Washington; Editing by Michelle Price and Richard Chang)


Leave a Reply

Your email address will not be published. Required fields are marked *