Patrick McHenry, a House Republican lawmaker, plans to introduce legislation around crypto regulations after lawmakers return to work on July 11. The bill includes detailed information about the use of cryptocurrencies.
The lawmaker stated at a hearing on Tuesday:
“I intend for this committee to mark up some form of this legislation when we return from the July 4 recess.”
McHenry has been an active advocate of clear rules and regulations for the cryptocurrency industry. He and a few others have presented a discussion draft to clarify regulators’ expectations and assist crypto companies and exchanges in following proper procedures.
Regulatory Concerns in the Crypto Industry
Many exchanges have been sued as a result of unclear regulations. The SEC, for example, has taken exchanges to court for listing cryptocurrencies that should have been registered as securities but were not. These exchanges have been sued for listing unregistered securities.
Beyond the tokens listed, the services of crypto exchanges have also been under thorough scrutiny. Binance was sued earlier by SEC for mishandling investors’ funds and misleading the public based on the company’s registrations. Part of the SEC’s charges against Coinbase is that the crypto company offered a staking service with unregistered securities. Kraken also faced similar issues earlier in the year.
Many people have become pessimistic about cryptocurrencies as a result of regulatory issues. Nobody wants to invest in a product that might be declared illegal the next day. One could also argue that the constant lawsuits and court cases between crypto companies and regulators cast a negative light on crypto products.
Uncertainty around the Crypto Regulatory Draft
Having clear regulatory standards for cryptocurrencies has been a major concern among US lawmakers in recent years, and much effort has been put into it. However, it is unclear how well the draft to be presented on July 11 will be received.
According to reports, Democrats on the panel are considering crypto regulations but are concerned, particularly about granting crypto exchanges provisional registration, which could potentially attract illicit activities. In addition, key Senate Republicans are also skeptical of crypto products.
For example, Elizabeth Warren, a US senator, has expressed her skepticism about cryptocurrencies in many ways, emphasizing national security concerns in her arguments. She expressed her disinterest in crypto during the Silvergate bank crash, blaming it on the bank’s involvement with crypto.
As the bank of choice for crypto, Silvergate Bank’s failure is disappointing, but predictable. I warned of Silvergate’s risky, if not illegal, activity – and identified severe due diligence failures. Now, customers must be made whole & regulators should step up against crypto risk.
— Elizabeth Warren (@SenWarren) March 8, 2023
There have also been reports that she is putting together an anti-crypto army.
Given these circumstances, it is doubtful that the bills will easily pass the Senate without further arguments. The question could then be whether the end result will favor crypto products and services.