Crypto Gets Lumps of Coal From Congress
As we detailed last week, the House Financial Services Committee and Senate Banking tackled not just FTX’s meteoric plunge, but also policies to respond to it and broad problems across the cryptosphere (see Client Report CRYPTO36). Although nothing substantive will happen regarding new digital-finance law in what’s left of this Congress, these hearings lay a strong platform on which new debate on digital-finance reform will proceed early in 2023. Whether there will be new law remains an open question – as we noted, Senate Banking Chairman Brown (D-OH) one day said he wants to craft some and then the next returned to calling on Secretary Yellen to write a raft of new regulations. Still, we think that there will be new law – and not just to ensure AML compliance along the lines included in the Warren-Marshall bill – because we expect HFSC under incoming Chairman McHenry (R-NC) to advance one that, at least for now, might well pass the bitterly-divided House. To be sure, Democrats will balk at anything that hamstrings the SEC, but there is growing agreement on how best to redefine digital finance so it is the innovation Republicans espouse without posing the risks Democrats decry.