At last week’s DeFiCon in Brooklyn, New York, the most important blockchain issues currently pulsing in Washington were on full display as three congressional staffers who advise congressmen on the House Financial Services Committee talked digital assets.
- Francesco Casella, Senior Policy Advisor for Rep. Ted Budd (R, NC)
- Sruthi Prabhu, Senior Policy Advisor for Rep. Trey Hollingsworth (R, IN)
- Lizzie Fallon, Financial Services Policy Advisor for Rep. Tom Emmer (R, MN)
Joining the troika was Ron Hammond who may have pulled from his Rolodex to bring the experienced panel together. He served as a staffer for Rep. Warren Davidson (R, OH), who co-sponsored with Rep. Darren Soto (D, FL) such crypto legislation as the Token Taxonomy Act and Digital Taxonomy Act in 2018 and 2019. Mr. Hammond is currently Director of Government Relations at the Blockchain Association.
Dan Spuller, Head of Industry Relations at the Blockchain Association, guided the discussion.
Knowing the details of key crypto issues and legislation is the day-to-day job for a growing force of congressional staffers and there is no shortage of topics as the hour-long panel proved.
Quotes lightly edited for clarity.
Fixing the infrastructure bill
With an overly broad definition of what a broker is and egregious reporting requirements pushed on to decentralized finance, wallet providers, miners and others by last year’s Infrastructure Investment and Jobs Act, panelists agreed that changes are imminent as heralded by the recent digital assets reporting bill co-sponsored by Senators Portman (R, OH), Warner (D, VA), Sinema (D, AZ), Lummis (R, WY) and Toomey (R, PA)…
Francesco Casella (staffer for Rep. Budd – R, NC):
[Last year’s infrastructure bill debacle] was really when he saw the crypto industry come into its own in terms of getting its own voice and finding its power. Many of us can probably attest to the influx of calls, messages and emails that we were getting on this issue. And it’s funny to think that in this massive infrastructure package, crypto became the number one topic of discussion that no one thought of because of this one provision.
I know our office was leading a fight on trying to push for adoption and have one of the original amendments to fix that language. Unfortunately, it went for naught because of some unrelated issues that killed it…”
Congressional Blockchain Caucus expansion
The bipartisan Congressional Blockchain Caucus has become the “water cooler” for crypto legislation in the U.S. House of Representatives. With a refresh coming to membership in the Caucus after fall elections, it appears to be evolving to the next stage…
Lizzie Fallon (staffer for Rep. Emmer – R, MN):
“… we’ve got about 40 members now who are committed to a light touch, common sense approach to crypto regulation. It had been an educational vehicle up until probably August of last year.
Today, the Caucus is still an educational vehicle – because that’s most important right now. But, we’re working to mobilize it into more of a policy vehicle so we can get to a place where all the members are onboard to push certain policy provisions or to block them like the ‘Portman Amendment’ and the Infrastructure bill.
The Caucus has been a great tool and it’s been cool to see the interest from the crypto community to utilize the Caucus, which has become a trusted institution in Congress for perspectives on crypto because the four co-chairs of the Caucus span the political spectrum. We have leaders from the Progressive Caucus all the way to the Freedom Caucus with moderates in between – like my boss (Rep. Emmer) and Rep. Darren Soto who all agree on an approach to legislating and regulating this space.”
Stablecoin law this year or early next
With stablecoin legislation pouring out of Congress in the past year including bills such as the Stablecoin Trust Act from Senator Pat Toomey (R, PA), the Stablecoin Innovation and Protection Act from Rep. Josh Gottheimer (D, NJ) and the Stablecoin Transparency Act introduced by Senator Bill Hagerty (R, TN) and Rep. Trey Hollingsworth (R, IN) in the House, it’s clear that the “push” has moved to the “shove” phase for stablecoins in the US regulatory framework…
Sruthi Prabhu (staffer for Rep. Hollingsworth – R, IN)
“[Rep. Hollingsworth] has been focused on the conversation around fiat currency-backed stablecoins and trying to provide regulatory clarity as well as ensure transparency around what reserves are held -and that they’re high quality. With our first piece of legislation, one of the biggest challenges we have right now as legislators is that there really aren’t any existing definitions out there.
(…) We have seen several pieces of legislation from the Senate addressing stablecoins in other parts of the ecosystem. In general, the significant progress being made on stablecoins is not something you commonly see around the Hill on digital assets -or even other issues.
If we were to list off the most pressing needs with the most consensus, stablecoins are definitely at the top of the list. We’re going to see a lot more movement – and potentially even a bill signed into law – late this year, early next year.”
CBDC’s privacy tripwire
With consumer privacy concerns paramount for panelists as it relates to a US Central Bank Digital Currency, there appears little chance the Fed will be able to dip its US dollar-driven “toe” into CBDCs without raising an uproar in Congress…
Lizzie Fallon (Emmer):
“I hope not. But, that’s what the Fed’s studying. That’s what the MIT Digital Currency Initiative is about – a retail-focused Central Bank Digital Currency. So, it’s something that they’re studying. And, the Executive Order from the Biden Administration on digital assets places the highest urgency on studying CBDCs. In Congress though, it is a non-starter -especially for Republicans. It’s a non-starter for several Democrats, too. And the biggest question is, “What problem does it solve?” It’s not very clear why we’re doing this, and I know it would be a big issue for Rep. Emmer. (…) I think when you put it in the context of ‘This is government controlled, programmable money,’ it really puts everything into perspective.”
Francesco Casella (Budd):
Not many of us are very convinced on the use cases of CBDC’s and what they solve. My personal opinion is that the private market already solves this problem and has issued a consumer product with stablecoins that does everything a CBDC would do. I always look at China and the digital Yuan and see the worst potential use case for something here: huge privacy concerns, financial freedom concerns – plus, the government’s not the greatest innovator. So why would we allow the US government to issue this? There may be merit for interbank transfer use cases, but from a consumer standpoint, I don’t think it’s necessary.”
New Treasury Secretary in 2023?
Blockchain Association’s Dan Spuller posited for the audience that one of the worst kept secrets in Washington is Treasury Secretary Janet Yellen will resign and be replaced by SEC Chair Gary Gensler after the mid-terms. Panelists did not appear favorable to this potential development…
Lizzie Fallon (Emmer):
“We sent an oversight letter to Chair Gensler in March requesting answers on 12 or 13 different questions about how they collect information from the crypto community, have they done a cost benefit analysis -and a lot of very detailed questions. He responded, but not to any of the questions. The letter was from a bipartisan group of members: four members from the Republican side, four from the Democrat side. And three of the Democrats were on Financial Services Committee. I think it was quite effective for that reason.”
Ron Hammond (Blockchain Association):
“I want to highlight again: there were four Democrats who went against their own party to say, “Look, we are concerned with the Democrat administration in the SEC about how they’re approaching crypto.” That’s really rare for someone to attack their own party in politics -normally, there’s a lot of tribalism in DC. So when four members of Congress step out and say, “We have concern with our own party and the direction they’re taking.” -that’s very concerning. One of the Democratic members of Congress who was on that letter was Richie Torres, who represents Brooklyn. So, it’s really exciting to see one of the most progressive members in the US House, be very critical of this approach. It’s really exciting to see the bipartisan pushback.”
On US Treasury blocking a mixing service
With no pun intended, the reaction to the sanctioning of decentralized finance app Tornado Cash and associated crypto wallets was mixed among the panelists. On the one hand, sanctioning technology seemed odd, if not wrong. On the other, with hundreds of millions of dollars in stolen funds passing through crypto mixers in order to anonymize those funds on behalf of criminals, how should mixers be addressed by government, if at all?
Francesco Casella (Budd):
“Man! Wow… that was some crazy news that dropped. I think regardless of your opinion on it, the fact that you have the government coming out and essentially blocking a tool – not an individual or a group of actors – but a tool that was unfortunately being used for illicit use by a bunch of actors, and blacklisting it, has some grave concerns. I think CoinCenter has done a lot of good stuff on this recently. And it goes back to a comment I made earlier about freedom of speech. We’re seeing code being removed from GitHub related to the Tornado Cash sanctions… that’s problematic. This is the US. We don’t ban freedom of speech.”
Lizzie Fallon (Emmer):
On the OFAC sanctioning point, there are a lot of outstanding questions because this seems different from how the traditional process has worked. It would help us and ultimately help you guys (gesturing to the conference’s audience) better understand what those outstanding questions that you all have. What does this mean for the people who are receiving funds through Tornado Cash, unwillingly or voluntarily? What does this mean for X, Y, and Z? Those would be good questions for us to understand. We welcome it all.
For all the complaints around a gerontocracy running the US government, this panel of staffers showed otherwise.