Washington D.C.’s population is inflating again with the commencement of the 118th Congress and there’s no better time to prognosticate on the blockchain legislation possibilities in 2023.
With the humiliation wrought by Sam Bankman-Fried (SBF) and FTX burned into the Congressional record (1, 2, 3) in 2022, action would appear imminent one way or another.
The Digital Commodity Consumer Protection Act (DCCPA) from Senate Agriculture Chairwoman and Senator Debbie Stabenow (D, MI) and Ranking Member and Senator John Boozman (R, AR) was in the pole position for new crypto law in the U.S. But with FTX founder and CEO Sam-Bankman Fried’s fingerprints all over this legislation through his congressional collaboration last year, DCCPA looks radioactive.
So, in spite of the theatrics of a December Senate Agriculture hearing where everyone including Commodity Futures Tradiing Commission Chair Rostin Behnam tried to distance themselves from FTX while still professing support for DCCPA, there’s no way forward for the bill.
Enter a re-purposing of DCCPA that will continue to address jurisdiction of the Bitcoin and Ether cash markets by the CFTC. But, even this bill will be met with skepticism given the SBF connection and his mugshot continuing to clog the mainstream and social media airwaves.
With DCCPA suffering from its exposure to the collapse of FTX, the blockchain legislation baton could get passed to the Responsible Financial Innovation Act (RFIA).
The indefatigable Senator Cynthia Lummis (R, WY), who is the source waters of RFIA, tweeted optimistically on December 26 about her bill even if she did begin her Twitter statement somewhat ominously, “2022 lit the discussion around the regulation of digital assets on fire.” Quite right.
With the broad scope of RFIA often cited as making the bill hard to pass quickly, a slimmed down RFIA may make sense in 2023 especially given the FTX drama.
Also, due to a divided government, bipartisan efforts remain key to any passage. Lummis’ coordination with co-sponsor Senator Kirsten Gillibrand (D, NY), who was on the Senate Ag and Intelligence Committees in the last Congress, appears to bear added importance.
Senator Sherrod Brown (D, OH), Senate Banking’s Chair, and committee member Senator Elizabeth Warren (D, MA) are strong critics of crypto as illustrated by the December Senate Banking hearing on FTX. The Senators appear to either want no regulation and keep the crypto industry out of the U.S. (Brown) or take the “crypto” out of “cryptocurrency” and regulate it into submission (Warren) with stringent Anti-Money Laundering and Know-Your-Customer requirements.
Senator Gillibrand has been quiet on blockchain legislation since the FTX scandal blew up.
Senate Banking Machinations
With Senate Banking Ranking Member Patrick Toomey (R, PA) leaving with the last Congress, who will take the Republican role in the 118th Congress?
By seniority, it would appear Senator Mike Crapo (R, ID) would be in line if he so chooses – especially given the imprimatur of his previous position on the Republican “Committee of Committees“.
Also, the new Senator for North Carolina, Ted Budd, would appear to be well-suited for a role on Senate Banking given his past participation on Financial Services when he was in the House. But, with fellow North Carolinian Senator Thom Tillis already there, Budd may be headed to other assignments unless a waiver can be worked out.
DCEA’s new life
With DCCPA struggling, Rep. Glenn “GT” Thompson’s (R, PA) Digital Commodity Exchange Act (DCEA) – which has helped inform RFIA and DCCPA – may result in leading legislation for both House and Senate. Thompson will take over as House Agriculture’s Chair after being its Ranking Member in the last Congress.
Coordinating through Thompson may be the best way forward for DCCPA proponents given the Agriculture Committee symmetry between House and Senate (DCEA and DCCPA, respectively).
Stablecoin bill will pass
If a stablecoin bill was the only bill to pass and signed into law in 2023, many crypto advocates would likely be satisfied.
In fact, stablecoins seemed like a good bet for major legislation turning into law in 2022, but the complexity of such a law appeared to give everyone pause – especially as U.S. Treasury and the Biden Administration gave their input to House Financial Services (HFS) and Chairwoman Rep. Maxine Waters (D, CA).
With Representative Patrick McHenry (R, NC) becoming Chair and Rep. Waters likely assuming the Ranking Member role on HFS, momentum built last year will carry over regardless of FTX fallout. There is an urgency for the U.S. government to speak to stablecoins and how they should work in the U.S. economy. TradFi (traditional finance) wants this one, too, and an effective bill would speak to encouraging the global primacy of the U.S. dollar.
Decentralized Finance (DeFi) will get its own bill – DeFi will be addressed in a bill of its own even though one could rightly argue anything that BTC and ETH touches is decentralized. This bill may be only a placeholder in 2023 and not pass for two or three years due to TradFi pushback and a complex topic.
Someone will publicly fall at CFTC or SEC due to FTX – Guilt by association will be too much for someone high up in at least one of the regulatory agencies, causing them to leave government (not be fired) and head to the private sector.
Evolving the SEC and CFTC – Discussions begin on how to turn the CFTC and SEC into code. The future: U.S. regulation is code.
Bipartisanship wavers – Warren-Marshall bill will shake the bipartisan support for crypto and blockchain technology in Congress by revealing opposition among some House Republicans. Majority Whip and Rep. Tom Emmer will try to douse the flames while growing the Congressional Blockchain Caucus from the 39 members it had in the 117th Congress. As always, significant Democratic membership in the Caucus will be critical.
Toomey reappears – The blockchain industry will continue to try to figure out how to best serve its interests as well as Congress’. A big hire is needed and – prediction! – it’s going to be former Senator Patrick Toomey (R) of Pennsylvania who reappears on the DC scene after a few months of vacation. Circle will pay his tab.
Number go sideways – Bitcoin price will be flat by the end of December 2023 in comparison to the start of the year.