A House Hearing on Crypto? More Like a Big, Partisan Fight

The movement of crypto legislation through Congress suffered a setback on Tuesday. At the beginning of what was supposed to be a scheduled joint House hearing on the most significant bill to the crypto industry, on a digital asset market structure, Rep. Maxine Waters (D-Calif.) dramatically objected, derailing the session.The splintering between the Democrats and Republicans over the issue calls into question whether either a stablecoin or market structure bill will be on President Trump’s desk to sign into law by August, as he has requested. It also raised the possibility that Democrats’ concerns about Trump’s conflicts of interest regarding his family’s entrepreneurial crypto activities could impede the industry’s best chance in years to get long-desired legislation over the line. Waters Walks Out as Tensions Boil What began as a planned bipartisan hearing on market structure between the House Financial Services and Agricultural Committees quickly unraveled. The two committees share jurisdiction over digital asset regulation, with Financial Services overseeing the SEC and Agriculture overseeing the CFTC.Waters objected on procedural grounds to the hearing’s format, citing that a joint session requires unanimous consent — consent she would not give. “I object to the joint hearing because of the corruption of the President of the U.S., his ownership of crypto, and his oversight of all the agencies,” Waters declared. Chairman French Hill (R-Ark.) responded sharply: “Through her actions today, the Ranking Member has thrown partisanship into what historically has been a strong working bipartisan relationship.” Read More: Can These 4 Factions Stop Fighting Over a Crypto Market Structure Bill?Following the objection, Waters invited Democratic colleagues to join her in a separate room for a discussion on “Trump’s crypto corruption.” Rep. Stephen Lynch (D-Mass.) attempted to pile onto the objection but was cut off by the Subcommittee on Digital Assets Chair Bryan Steil (R-Wis.), who ruled the event no longer qualified as a formal hearing.“You are no longer recognized by the Chair,” Steil said, noting that procedural protections under House rules only apply during a formal hearing. Republicans then reclassified the session to a roundtable, changing witness status to “panelists” and relabeling the event on the House website as a “discussion.” Waters and most Democrats exited the hearing room to hold their own event.The Republican Discussion on Market Structure Once tensions subsided, the newly branded roundtable proceeded with panelists discussing draft legislation on market structure that was just introduced on Monday. A major theme of the discussion focused on streamlining the respective roles of the SEC and CFTC to avoid regulatory fragmentation or dual oversight and providing the CFTC jurisdiction with the regulation of the spot market for commodity tokens. Panelists included Rostin Behnam, former CFTC Chair appointed by President Biden; Greg Tusar, Vice President of Institutional Product at Coinbase; and James Rathmell, General Counsel at Haun Ventures. Read More: A Market Structure Bill by August? Why Some Crypto Traders Want Congress to Slow DownThroughout the hearing was a sense of purpose on the importance of finally providing regulatory clarity to stop promising entrepreneurs from going overseas to build their projects. “The U.S. must not fall behind global competitors when it comes to building out a responsible digital asset ecosystem,” said Tusar.The Democratic Discussion on Trump’s Crypto Ties Meanwhile, the Democrats convened their own event — officially labeled on their site as a “Democratic Hearing to Discuss Trump’s Crypto Corruption.” Their focus was on ethical concerns and included draft legislation regarding public officials’ ownership of digital assets. A heavy focus was on President Trump’s personal stakes, which has added $2.9 billion to his personal net worth according to one recent report through the sale of NFTs, memecoins, and tokens tied to his family’s crypto enterprise World Liberty Financial.Witnesses included Timothy Massad, Research Fellow and Director of the Digital Assets Policy Project at the Harvard Kennedy School, and Mark Hays, Senior Policy Analyst at Americans for Financial Reform. The hearing highlighted the potential violation by President Trump of something known as the ‘Emoluments Clause’ in the Constitution that restricts gifts, payments or benefits from foreign states without congressional approval. The specific concern surrounded Trump’s crypto interests if foreign or state-affiliated entities are purchasing his tokens or using platforms tied to his financial wealth. “We are seeing a convergence of political power and financial self-interest that the Founders warned us about — and that the Emoluments Clause was designed to prevent,” said Massad. Although not part of the specific hearing, Senator Chris Murphy (D-CT) also introduced the Modern Emoluments and Malfeasance Enforcement (MEME) Act today that would prevent a President from launching Meme coins such as $TRUMP. U.S. Representative Sam Liccardo (D-Calif.) introduced companion legislation in the House in February. The effort, while likely not going very far in a Republican-controlled House, is indicative of the high level of focus Democrats have related to the President’s involvement in cryptocurrency. Read More: Coinbase Aims to Jointly Pass Market Structure and Stablecoin Legislation in CongressA Cloudy Congressional OutlookWhile both the House and Senate Republicans still hold the majority and Trump is President, time is running out to get crypto legislation passed. Typically, the best time to get through any laws is before the first August recess. President Trump himself has said that it is critical to pass crypto legislation in the next three months.However, Tuesday’s disruption throws another wrench into the congressional fire where key debates are raging regarding how to determine whether a crypto token is sufficiently decentralized to skirt SEC oversight and the industry itself cannot determine if it wants both stablecoin and market structure passed in one bill or two.Adding to the complexity is that the passage of a stablecoin bill in the Senate, something that seemed a fait accompli and the lowest hanging fruit as of last week, may similarly be in jeopardy. This past Saturday, May 3, Sen. Ruben Gallego (D-AZ) and eight other Democrats reversed course and opposed the GENIUS Act, the Senate version of the stablecoin bill — despite Gallego’s earlier support in committee on March 13. Sens. Andy Kim (D-NJ) and Adam Schiff (D-CA) also came out against the bill, marking a setback for the crypto lobby, which had backed both. Then on Tuesday evening, Sen. Richard Blumenthal (D-CT), Ranking Member of the Permanent Subcommittee on Investigations, launched a formal inquiry into Trump’s crypto ties. The press release from Blumenthal notes his investigation comes after Fight Fight Fight promoted a private dinner with President Trump and a VIP White House tour for top token holders, which pumped the value of $TRUMP to the financial benefit of the President. Hill issued a statement after the roundtable stating, “Last Congress, 279 Members showed that they do not support the status quo.” Hill was referring to the number of House Members who voted last year for market structure legislation in the FIT Act for the 21st Century, highlighting the bipartisan nature of the vote with 71 Democrats. After Tuesday, that feels like a long time ago. The post A House Hearing on Crypto? More Like a Big, Partisan Fight appeared first on Unchained.