US Congress Holds First Joint Committee Hearing on Crypto Legislation

Two committees in the US House of Representatives held the first-ever joint hearing related to crypto on Wednesday, seeking to carve a path forward to legislation on digital assets. 

The early stages of the hearing proved combative, with certain Democrats questioning whether crypto-specific legislation should be signed at all. 

A Focus On Making Law

The hearing, held by the House Financial Services Committee (HFSC) and the House Agriculture Committee, was titled “The Future of Digital Assets: Measuring the Regulatory Gaps in the Digital Assets Market.”

HFSC chairman Patrick McHenry announced that the hearing would take place this month at Consensus 2023 in April, confirming that it would relate to the market structure surrounding digital assets. In his opening remarks, McHenry stressed to his fellow committee members that “the purpose here is to make law.”

“We need to get this right, for a couple of reasons,” he said. “One is to harness innovation and enable consumer protection. The other is the ensure that the CFTC and the Securities and Exchange Commission will work together to ensure that consumers are protected, unlike what is currently happening.”

His counterpart and ranking Democrat within the committee, Maxine Waters, agreed that it was time to get back to drafting legislation –citing limits in the Security and Exchange Commission (SEC)’s authority to go after fraudulent crypto firms. “These should be bipartisan concerns, and legislation to address them should have a path to the President’s desk.” 

Stephen Lynch, the senior Democrat on the digital assets subcommittee, wasn’t entirely in agreement, however. He claimed that creating new legislation for digital assets seems “redundant and unnecessary” given that the financial system’s current securities laws have “sustained massive innovation in our financial system for decades.”

His comments were largely in line with those of SEC chairman Gary Gensler, who has repeatedly stated that the laws on the books provide his agency with ample authority to regulate crypto. However, the Commodities and Futures Trading Commission (CFTC) has been at odds with the SEC for years, arguing that the CFTC has more authority over crypto than Gensler recognizes. 

Crypto’s Future in the United States

Toward the end of the hearing, Brad Sherman – the Californian Democrat and prominent crypto critic – questioned whether digital assets should even have a future in the United States. He referred to cryptocurrencies as a “hidden money system” that diverts capital investment from useful industries, and whose “announced purpose” is to defeat sanctions and tax laws. 

“Crypto bros make money literally by making money, and they’ve made over a trillion dollars,” said Sherman during a separate hearing later on Wednesday. “They’ll accuse the U.S. government of making money out of thin air. Maybe we do, but we’re the U.S. government.”

HFSC Chair McHenry concluded the hearing by claiming that the SEC’s current approach to disclosure statements and registrations “don’t work for digital assets,” and that the CFTC needs additional authority over the market.

“The CFTC and SEC alone can’t do this. Congress must act,” he said. 

Last month, McHenry said he expects that the President will have signed some piece of crypto legislation into law within the next 12 months.