The cryptocurrency industry is hoping for some gains in Washington this week, pushing for a new regulatory framework and new products that could expand its mainstream appeal.
The House is scheduled to vote Wednesday on a bill that would provide the kind of regulatory oversight the industry wants.
Separately, investors are hoping that the Securities and Exchange Commission is close to approving the first exchange-traded fund to invest directly in the cryptocurrency Ether (ETH-USD).
A key change proposed in the new bill, known as the 21st Century Financial Innovation and Technology Act (FIT21), would establish the Commodity Futures Trading Commission as the primary regulator for digital assets.
There will be a clear division between what the CFTC regulates and what falls within the purview of the Securities and Exchange Commission, a longtime enemy of the industry that has cracked down on businesses with enforcement actions and lawsuits.
It would also establish consumer protections and prohibit commingling of customer funds, such as the one that led to the collapse of cryptocurrency exchange FTX in late 2022.
The industry prefers this framework over aggressive SEC enforcement and has lobbied hard for this framework.
“[This] This officially ends the loser narrative that cryptocurrencies will never exist,” said Cody Carbone, chief policy officer at digital chamber, a crypto lobbying group.
The bill faces opposition from some Democrats and could still face an uphill climb in the Senate even if it passes.
“What the Senate will look at is the vote total,” said Republican Rep. Patrick McHenry, the bill's lead sponsor. “Senators will look at the vote totals and reconsider this bill.”
The price of one particular cryptocurrency, Ether, has been rising this week as investors grow more confident that the SEC will give them the green light to invest in the Ether ETF.
In January, the SEC approved an ETF that invests directly in Bitcoin (BTC-USD), a development that expands mainstream acceptance of the world's largest cryptocurrency. Now, investors are hoping the same thing will happen with the second-largest cryptocurrency.
“Given the political 'behind-the-scenes' drama, approval would represent significant regulatory relief for the industry,” Bernstein analysts said in a note.
The crypto industry expects the same from the bill scheduled to be introduced in the House of Representatives on Wednesday.
Approximately 60 crypto companies and industry associations, including Block, Coinbase (COIN), Circle, Kraken, and Paxos, sent a letter to House leadership last week supporting the bill.
“This bill is well-written,” said Kara Calvert, head of U.S. policy at Coinbase. “This is the first bill that explicitly considers how we think about diversification, how we think about moving from something like a security to something like a commodity.”
Calvert said the bill would allow regulators to focus on creating rules for centralized tokens, allowing for more centralized control of resources rather than sporadic regulation by enforcement agencies.
Republican lawmakers say the bill would clarify an important question: whether certain digital assets are securities. The SEC argues that many virtual currencies are actually securities and therefore should be monitored by the SEC.
But most House Democrats, led by House Financial Services Committee ranking member Maxine Waters, oppose the bill.
Waters held a briefing session for Democratic lawmakers on Monday, urging them to vote against the bill. She warned that changes made to the bill since last summer would result in major deregulation of both cryptocurrencies and some traditional securities.
In a letter sent to Democratic House Democrats and reviewed by Yahoo Finance, Waters and David Scott, ranking member of the House Agriculture Committee, said the revised bill would “enable most cryptocurrencies and some traditional “This would move a number of securities into a regulatory vacuum, with no major regulator and effectively unregulated.” laws and regulations. ”
The end result will be “an epidemic of fraud with devastating consequences for consumers and investors,” the letter said.
Democratic lawmakers argued that the definition of “digital assets” and the addition of the revised bill regarding “investment contract assets” would remove most virtual currencies from the SEC's jurisdiction and effectively deregulate them.
They also worry that by making the CFTC the primary regulator, consumers and investors will no longer have the same types of protections they enjoy under the SEC.
It's unclear how much opposition the bill will face in the Senate.
Senate Banking Committee Chairman Sherrod Brown (D-Ohio), who has prioritized cracking down on cryptocurrencies used for money laundering, has so far remained silent on the House cryptocurrency bill.
“We must ensure that cryptocurrency platforms play by the same rules as other financial institutions,” Brown said in a statement last month, “and ensure that they have the tools in place to police illicit finance with digital assets, just as they do with other assets.”
McHenry said he hopes Wednesday's vote will get the attention of senators.
“We're going to do everything we can to get as much as we can out of this Congress,” McHenry said of passing crypto policy.
“There is bipartisan support for the move, but no matter what happens this Congress, this set of policies is inevitable, just as the role of cryptocurrencies will continue to be. .”
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