It was a mega bill.
About megabytes.
And mega-dollars.
But, hacked – by a lack of consensus.
The Senate Banking Committee canceled a scheduled meeting last Thursday to write a bill establishing marketplace rules for cryptocurrency and other digital assets. This was a long-awaited session for a bill lawmakers, aides and lobbyists have worked for – and against – for years.
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But the glitch in the Congressional matrix stymied the legislation.
This was the legislative version of Control+F7.
“It was a blow,” lamented Sen. Cynthia Lummis, R-Wyo., one of the most ardent advocates for cryptocurrency in Congress. “I feel a little bit like Flat Stanley after he got run over by the Mack Truck.”
The Senate tried to tiptoe through the crypto.
But everything went haywire.
One key industry player blasted the legislation.
“We’d rather have no bill than a bad bill,” wrote Coinbase CEO Brian Armstrong on social media.
Armstrong then appeared on Capitol Hill after the Banking Committee tanked the hearing to elaborate on his statement.
“I felt a responsibility to speak up for our customers and the 52 million Americans who use crypto and say that the current draft text would be materially worse for them. I felt an obligation to stand up for customers. But I defer to the Senate procedurally on what happens next and in what order,” said Armstrong.
There’s a conflict between cryptocurrency advocates and some in the banking industry. Banks worry that the digital asset know as stablecoins could steal their business. The value of stablecoins are pegged to other fixed holdings, like gold, the dollar, or the euro. Congress approved and President Trump signed into law The GENIUS Act last year. That measure established regulations for stablecoins. However, a provision in the legislation allows some stablecoin holders to earn “rewards” depending on how the asset performs.
These rewards are in essence “interest.” And the returns could be higher than what an investor might make on a interest-bearing checking or savings account at a conventional bank. Some in the banking industry pushed lawmakers to unspool that provision in the law – even though the President just signed it.
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The demands upset some members of the Banking Committee. Sen. Bernie Moreno, R-Ohio, suggested that old-style banking rules were behind the digital times.
“They have to come to consensus with the innovation community. If they can’t, then they’re going to have to live with the status quo,” said Moreno.
It’s noteworthy that cryptocurrency played a role in electing Moreno in 2024. Moreno defeated former Sen. Sherrod Brown, D-Ohio. Brown chaired the Banking Committee. Crypto-backed superPACs poured $40 million into the Moreno/Brown race in hopes of defeating the Banking Committee Chairman. Brown harbored reservations about crypto and opposed legislation pushed by the industry. Moreno’s win is perhaps the most successful foray by the crypto lobby into electoral politics.
Regardless, the crypto legislation is on the shelf. One source close to the process characterized it as “messy.” Sen. Thom Tillis, R-N.C., who is retiring, predicted that the panel would hold a successful markup of the crypto legislation “in the first quarter of this year.” Lummis also retires early next year. And if nothing happens soon, it’s possible the Wyoming Republican could leave the Senate without action on her hallmark issue.
“What it does is reset the clock a little bit for me,” said Lummis of the committee cancellation. “I have 11 more months to work on this and get it done and get it better.”
It’s only January. But the midterm election calendar is already a threat as interested parties toiled for years on this bill – only to wind up with a postponed session to craft the bill.
“What does that do? That’s two more years where the U.S. is not leading the way in terms of the crypto market globally. And it’s really important for U.S. consumers, the U.S. economy, our national security, for the U.S. to be the dominant market for crypto,” said Blockchain Association CEO Peter Smith on FOX Business. “If this doesn’t pass now — and it’s been worked on already for about a year-and-a-half — that will result in a significant delay after the midterms. This means, realistically, two more years of delay.”
Lawmakers tracking crypto regulation worry that the U.S. is falling behind.
“We want to be the center of the global economy for the next generation. We’re not going to do that if we don’t get this right,” said Rep. William Timmons, R-S.C.
Timmons suggested that cryptocurrency would be a “very disruptive technology” which will “change everything in our financial system.” Timmons says that “tens of billions of dollars will come back to the U.S.” if Congress establishes a good framework. If not, everything related to crypto may go overseas. That threatens the U.S. economy and the American banking system.
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“People should care because if we don’t get it right, it could be destabilizing to their traditional community banking system,” said Tillis, adding that the U.S. is the “gold standard” for worldwide banking.
“If we want to continue to do that, then we also have to get crypto right because it is, no question, a part of the future of top-tier banking systems,” said Tillis.
But there are some who want to delete cryptocurrency altogether.
“The advantage of crypto — and they put it right in the name — is that it is literally hidden money,” said Rep. Brad Sherman, D-Calif.
He argues that crypto is a haven for crime and tax evasion.
“Clearly, we’d be better off without it. Not every invention is actually helpful,” said Sherman.
But House Financial Services Committee Chairman French Hill, R-Ark., says the technology behind cryptocurrencies makes it easier to track. Thus, harder to use for crime.
“The choice transaction method for criminals is actually cash,” said Hill. “Drug dealing and smuggling is still frequently done in cash. Same with trade-based money laundering. Or even stacks of gift cards bought at retail stores.”
The New York Stock Exchange just announced it was launching a platform to trade “tokenized” securities, such as crypto. The market would work on blockchain technology, the backbone of cryptocurrencies. The trades would be instantaneous. Many trades on Wall Street today aren’t finished until the next business day. Plus this service would be open 24/7. Not just during a regular weekday trading session.
The point is that the free market is well ahead of Congress. Capitol Hill is an analog place. Not digital. And the U.S. could fall further behind if lawmakers continue to tiptoe through the crypto.
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