HFS Chair McHenry Warns SEC Chair Gensler; Ether Getting Closer Look By The SEC

Coinbase event – Chair McHenry

In Washington D.C. yesterday, Coinbase convened “Update The System” policy summit with the promise of showing policymakers use cases for crypto -or “onchain” as the company is promoting.

Republican House Financial Service Chair Patrick McHenry (R, NC) offered his input again on whether or not digital assets legislations could see the light of day in the remaining months of the 118th Congress. As he was at Tuesday’s Punchbowl News event, McHenry was guardedly optimistic on stablecoin legislation with the current plan including riding along “must-pass” legislation before the end of the year (presumably before the August recess).

McHenry told Coinbase’s policy chief Kara Calvert about the stablecoin possibilities (lightly edited for clarity):

“We need a legislative vehicle, we need a deadline. We can drive the stickier issues if we have a deadline. And so… ‘are we going to have legislative vehicles to get signed into law?’ I think that those chances have increased once we fund the government, which gives us the opportunity to land a product like a stablecoin bill. If we’re given that deadline. I do think there’s goodwill enough to to answer the President’s Executive Order on a need for a federal stablecoin legislation and further the work that Ranking Member [Maxine] Waters (D, CA) and I have been have been about for the last 20 months – we and our teams.”

McHenry explained his public view on why its taken so long to get a House floor vote on digital assets legislation:

“When I designed this plan, I didn’t anticipate that we were going to have the motion to vacate the Speaker in the fall…. that I would end up in the Speaker’s chair for three weeks…. all these various things that blew up the end of the year where I thought we’re gonna move our products. I didn’t anticipate the final four months of the year getting so jacked up – which they got very jacked up. And then it’s taken us three months to get our footing back. In those seven months, that’s when I wanted to have all of our actions taken care of.”

more tips:

    • Key U.S. Lawmaker McHenry Says House Has ‘Workable’ Stablecoin Bill – CoinDesk

what you should know: Given the House Floor vote plan, will a House Floor vote only take place for the must-pass on which the stablecoin bill will ride and/or will there be a separate vote on the stablecoin bill and digital asset market structure bills, for example? The value of a House Floor vote on the specific legislation such as stablecoins will be to reveal individual member support -or not. And, lurking in the reeds will be vigilant crypto Super PAC funds for Member’s November campaigns -or their opponents.

Coinbase event – Senator Lummis

Appearing after Chair McHenry, Senator Cynthia Lummis (R, WY) sat down with Coinbase’s Calvert for an extended interview.  Lummis, also, talked about the  stablecoin bill floating in Congress and noted the stablecoin language in the digital assets regulatory framework bill she and Senator Kirsten Gillibrand (D, NY) have sponsored, “Lummis-Gillibrand Responsible Financial Innovation Act [S.2281]”

Sen. Lummis said:

“The Administration’s willingness to move forward with stablecoin legislation, I think makes it by far the most optimal portion of this to move forward. [Senate Majority Leader] Chuck Schumer (D, NY) to his credit is willing to consider it, so you’ve got some bipartisan motivation to move this forward. And, you just heard from Patrick McHenry, about his relationship with Maxine Waters and what they’re doing in the House. Senator Gillibrand and I have also been negotiating the Senate version.”

“But, we’re staying in touch daily with our House counterparts. So it’s bipartisan and bicameral. Now, I’m not saying that our drafts are identical, but we’re discussing it with the expectation that we will be able to come to an agreement and compromise between the two. So I’m most optimistic for calendar year 2024 on stablecoins.”

The Senator took a moment to discuss the joint resolution she is guiding in the Senate that rescinds the Securities and Exchange Commission’s Staff Accounting Bulletin 121 (SAB 121). The House version has passed out of an HFS Committee markup.

She was realistic about the resolution given the Democratic control of the Senate today: “So, we’ll keep pushing the Congressional Review Act legislation just to help educate members of Congress about the errors and the ways of the staff in the belly of the SEC and, hopefully make some progress.”

what you should know: Democratic participation at the event was muted. Scheduled appearances by Rep. Ritchie Torres (D, NY) and Rep. Jim Himes (D, NY) – both supporters of the stablecoin and digital asset market structure bills – were cancelled as organizers explained that the Members had been called away by other business. The only appearance by Democrats was by Sen. Gillibrand in a recorded video statement offering support for the industry.

SEC overreach hearing

Even though the House Financial Services (HFS) Capital Markets Subcommittee Hearing titled, “SEC Overreach: Examining the Need for Reform” chaired by Ann Wagner (R, CO) was hardly a digital assets hearing, the recent sanctioning of SEC lawyers in the DEBT Box case forced the issue.

In posting video of his opening statement at the hearing, HFS Vice Chair French Hill (R, AR) said on X, “Whether it’s ‘DEBT Box’ or ‘DropBox’, [SEC Chair Gary Gensler] and the SEC are blatantly and repeatedly overstepping their statutory authority — and your tax dollars are paying for their failures in court.”

The Block’s Sarah Wynn reported that Rep. Hill “also pointed to other cases in which the SEC has not gotten a favorable outcome in the courts, including a New York judge’s ruling in July that differentiated the legality of Ripple’s sales of XRP…” Read the summary.

subpoenas and ETH

Fortune’s Leo Schwartz said on X yesterday that the Securities and Exchange Commision is using “subpoenas to crypto companies looking into the Ethereum Foundation and the security status of Ether as the agency weighs ETF applications.”

In the related Fortune article, Schwartz and Fortune’s Jeff John Reports report that “According to a person at a company who received a recent subpoena request, the SEC’s probe of the Swiss-based Ethereum Foundation began shortly after the blockchain’s shift to a new governance model known as ‘proof-of-stake’ in September 2022.”

Read Fortune on Yahoo.

more tips:

Ethereum Foundation Faces Investigation by Undisclosed ‘State Authority’ – PYMNTS.com

McHenry warns Gensler

Late yesterday afternoon, HFS Chair Patrick McHenry tweeted a warning to SEC Chair Gary Gensler: “Reports indicate [SEC Chair Gary Gensler] is moving to unilaterally classify #ETH as a security. This is contrary to the CFTC’s assessment and the SEC’s prior actions. Congress decides the SEC’s jurisdiction and budget, Chair Gensler doesn’t get to make it up as he goes along.”

what you should know: It’s unclear exactly what precipitated Chair McHenry’s tweet. But, in addition to the news about the Ethereum Foundation yesterday, at a House Agriculature CFTC oversight hearing earlier this month, CFTC Chair Rostin Behnam discussed the potential imminent custody of Ether as a security by Prometheum. This is viewed a potential way for the SEC and Chair Gensler to do an “end-around” and declare ETH a security without the input of Congress or the CFTC and arguably achieving the policy goals of the Biden Administration.


still more tips

Senate Banking invites Adeyemo to illicit finance and crypto hearing next month – Politico

Crypto’s New Pal, Gary Gensler – The American Prospect

Digital Dollar Project partners with the Digital Pound Foundation to strengthen international discussion and collaboration – Digital Pound Foundation