Tag: patrick mchenry

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Blockchain’s New DC Powerbroker: The Digital Assets Subcommittee

Digital Assets Subcommittee

With Rep. Patrick McHenry (R, NC) finally in his House Financial Services Committee Chair last week, the congressman whipped up a selection of subcommittees that will carry his party’s financial services agenda in the 118th Congress.

Among them, a committee devoted to digital assets: The Subcommittee on Digital Assets, Financial Technology and Inclusion led by Rep. French Hill (R, AR), a former banker.

Still to be populated with House Financial Services members from both sides of the aisle, there will be no other committee like it in Congress: digital assets and fintech-focused, all the time.

Bipartisan support for crypto legislation has been a key element of driving digital assets discussion in DC to-date (RFIA, DCCPA, DCEA and stablecoins) even if bills have yet to cross the finish line into law. With a wide spectrum of political viewpoints unifying over a common cause AND attempting to navigate a divided government, this committee would seem to be at the tip of the bipartisan crypto spear.

Topping the agenda for the new subcommittee will be working with (if not helping dictate along with Chair McHenry’s guidance) what the SEC, CFTC, the Fed and any other applicable regulator should do about digital assets and thereby define their jurisdictions.

This will be a years-long, legislative journey as technology and products evolve. But it has to start – or continue – somewhere.

The agenda

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FTX Had No Controls Says CEO John Ray At House Financial Services Hearing

House Financial Services Committee

With the arrest yesterday of FTX CEO Sam Bankman-Fried now in the rear-view mirror, House Financial Service Committee members undertook a review of the cryptocurrency exchange’s implosion with its current CEO John J. Ray who is overseeing the company’s bankruptcy proceedings.

The hearing titled, “Investigating the Collapse of FTX, Part I,” was led by Chairwoman Rep. Maxine Waters (D, CA) and Ranking Member Rep. Patrick McHenry (R, NC).  With Bankman-Fried’s appearance no longer possible due to his incarceration, there was  some measure of disappointment identified by both Waters and McHenry in the hearing’s opening statements. See the hearing video below.

McHenry made clear that he expects to hear from SEC Chair Gary Gensler “early and often” as the Ranking Member becomes Chair of the Committee in the next Congress. McHenry’s criticism of Gensler’s regulation by enforcement policy toward crypto is well-known.

Read all of McHenry’s opening statement.

Enter the new CEO

John J. Ray jumped right in with his criticism of the poor management, corporate malfeasance and inadequate security controls typical of his predecessors at FTX and its trading group, Alameda Research.

Read his complete opening testimony here.

As he concluded, Ray said:

“I would like to especially say to regulators – in the U.S. and abroad – that I completely understand the depth of outrage and frustration with what happened. I have instructed my team to cooperate as comprehensively and completely as possible, and much of our time so far has been spent on the truly herculean task of gathering and organizing information responsive to the many requests we have received.”

The Q&A

Reiterating themes from his testimony in the Q&A with Chairwoman Waters, Ray stated, “The operations of the FTX Group were not separated” – this is one reason U.S. regulators are even more interested.

FTX.us was not carved out of the international company. They were operated as one unit which violated the regulatory requirements for a U.S.-based cryptocurrency exchange. Mr Ray added, “There were no internal controls. There was no separateness.”

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Rep. McHenry Tempers Expectations On Imminent Stablecoin Legislation

Rep. Patrick McHenry

Rep. Patrick McHenry (R, NC) was the focal point of Politico’s “Writing the Rules of Crypto” event today at Washington, D.C.’s Hotel Washington.

The congressman clearly wanted to temper expectations on whether a bill on stablecoins could be forthcoming from the House Financial Services committee where he serves as Ranking Member along with Chairwoman Rep. Maxine Waters (D, CA).

Politico reporter Sam Sutton guided the panel discussion and cut right to the chase with McHenry asking him, “What’s the hold-up with stablecoin legislation?”

McHenry launched in eagerly saying, “A lot.  First, it’s an election year – big policymaking in an election year is hard.” Then, he provided a brief history on why regulatory guardrails were needed as well as revealing the influence of state stablecoin legislation – in particular, New York’s – which has helped inform the work undertaken thus far by the Financial Services committee in coordination with the Fed and Treasury.

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McHenry Proposes New Regulator for Digital Assets -not SEC or CFTC

Patrick McHenry

The Securities and Exchange Commission (SEC)  is not set up to handle the digital assets world said Rep. Patrick McHenry (R, NC) at a Punchbowl News event in DC today.

“I fundamentally think that the Securities Exchange Commission and the CFTC lack that capacity to well-regulate this new innovation,” McHenry told interviewer Anna Palmer. “I think you have to have a separate regulatory sphere for digital assets… that is neither the SEC nor the CFTC.”

Welcome to the Digital Assets Trading Commission (DATC)? Digital Assets Exchange Commission (DAEC)? 

As it relates to stablecoins, specifically, and regulatory infrastructure, McHenry said that existing regulators could handle it. Moreover, he seemed mildly optimistic about recent stablecoin proposals by the Biden administration as it related to his party’s emerging proposals (such as here and here).

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