House Financial Services Markup Gambit? Republicans Serve Democrats CBDC Poison Pill

CBDC markup Wednesday

Late on Friday, House Financial Services (HFS) Committee Chair Patrick McHenry (R, NC) announced that his committee will hold a markup “of Legislation to Strengthen American National Security, [and] Prevent the Issuance of a Central Bank Digital Currency (CBDC)” on Wednesday, September 20 at 10 a.m. ET in the Rayburn House Office Building.

Read Friday’s brief announcement.

The suddenness of this markup – there had been no inkling of it – says something about the Majority’s view. In fact, an HFS FinCEN hearing had originally been rumored to occur on Wednesday. There are bills with implications for FinCEN at the markup, though.

CBDC markup – the bills

Bills under consideration at the markup will include the bipartisan “Power of the Mint Act” [H.R. 3402] which was introduced in the Spring (see May press release) by Rep. Jake Auchincloss (D, MA) and HFS Digital Assets, Financial Technology and Inclusion Subcommittee Chair Rep. French Hill (R, AR).

“Power of the Mint” prevents the Federal Reserve from issuing a CBDC.

The HFS Majority Republicans will likely request a roll call vote in order to highlight the Democrats who also want to support the bill and send it to the House floor. Rep. Ritchie Torres (D, NY) and Rep. Wiley Nickel (D, NC) are co-sponsors as the generational divide on issues surrounding digital assets among HFS Committee Democrats sharpens. Rep. Barry Moore (R, AL) is a co-sponsor, too.

“Power of the Mint,”  Majority Whip Tom Emmer’s (R, MN) “CBDC Anti-Surveillance State Act” [H.R. 5403] and the “Digital Dollar Prevention Act” [H.R. 3712], which seeks to prevent a CBDC pilot unless authorized by Congress and was introduced by Rep. Alex Mooney (R, WV), could put HFS Democratic leadership in a tight spot.

CBDC markup – poison pill

HFS Committee Ranking Member Rep. Maxine Waters (D, CA) and Digital Assets Subcommittee Ranking Member Rep. Stephen Lynch (D, MA) – who appear to have dutifully advocated the White House’s position in HFS in the 118th Congress – have voted against recent stablecoin and digital asset market structure legislation led by the Republicans and have been generally antagonistic to the Republican HFS agenda. A “no” vote by Waters and Lynch here could be perceived by voters that Democrats want a CBDC in spite of voter concerns that begin with privacy, surveillance and security.

So for the Republican majority, even if the three anti-CBDC bills never make it through Congress and the Democrat-controlled Senate, the potential for Democratic leadership giving de facto support of a U.S. CBDC by rejecting the House bills is enticing. The “poison pill” might provide more fodder for the Republican 2024 general election agenda and a winning position with voters.

Meanwhile, ever since the implosion of FTX last November and the resulting demise of the bipartisan Digital Commodity Consumer Protection Act (DCCPA), Democratic leadership has appeared to position its party as “anti-crypto” in anticipation of 2024.

If Democratic leadership urges its caucus to vote against the anti-CBDC bills in the markup, this could signal their belief in one or both of the following scenarios:

A) Voters view a government-run CBDC as a way to fight back against “big tech” – this was the view expressed by a Democrat-selected witness, Columbia Law’s Raúl Carrillo,  at last week’s CBDC hearing by the Digital Assets Subcommittee.

B) The U.S. is falling behind the rest of the world – which is developing CBDCs – and must catch up. “The U.S. Dollar as the world’s reserve currency and American power are at stake” could be the pitch to voters.

crypto instead of stock

Nikkei Asia reported Friday that “Japan plans to let startups raise money from venture capital firms by selling such digital assets as cryptocurrency instead of stock, providing more funding avenues for up-and-coming companies involved in blockchain technology.” Read more.

Digital asset regulations are being re-written for limited partnerships resulting in new investment opportunities. Blockworks explains, “The new rule would add digital assets to a list of investment avenues available to those firms looking to put money into budding crypto startups, including stock options and securities.” Read that one.

more tips:

Web3 adoption could come via the enterprise, but the real boom will be through startups – TechCrunch

eliminating intermediaries

In an interview last week with CNBC, Ethereum co-founder and ConsenSys CEO Joseph Lubin hasn’t given up on the United States getting it’s regulatory act together when it comes to digital assets. He said, “The U.S. has a lot of influence on the world through financial intermediaries and other intermediaries, and decentralized protocol technology is about right sizing and eliminating intermediaries in many ways. The U.S. is also all about free markets, capitalism, free speech.” Read more and see a clip of the interview.

state of self-certification

Fox Business reporter Eleanor Terrett said Friday on X that the New York Department of Financial Services (NYDFS) is on the verge of change: “…NYDFS is set to release changes to its coin listing policy standards today, whereby crypto companies operating in New York state will no longer be allowed to self-certify the adoption/listing of new tokens. The revoking of the self-certification process aims to hold all BitLicensees and Limited Purpose Trust Companies (LPTCs) to the same DFS-approved listing standards and provide additional clarity to the industry plagued by scams. More details to come.”

still more tips

Opinion: What Crypto Can Learn From AI About Getting Its Way in Washington – CoinDesk

Ethereum developers approve tweak to slow down ‘staking,’ one of the few reliable ways to earn returns in crypto – Fortune

How the Lazarus Group is stepping up crypto hacks and changing its tactics – Elliptic blog

Binance.US not cooperating with investigation, US SEC says in filing – Cointelegraph

‘One of the Most Hated People in the World’: Sam Bankman-Fried’s 250 Pages of Justifications – The New York Times