Bipartisan discussions on a broad crypto regulatory package, previously stalled by the shutdown, are now intensifying, with Republicans pushing for multiple committees to review the legislation.
Crypto is a rare bipartisan spot on Capitol Hill this year, as the industry calls for clarity on how digital assets fit into regulations and the tax code. But lawmakers must first resolve a number of policy questions.
Senate Agriculture Committee Chairman John Boozman (R-Ark.), whose committee has jurisdiction over digital assets treated as commodities, is working daily with committee member Sen. Cory Booker (D-N.J.) to finalize their portion of a bill establishing a regulatory regime and plans to release a bipartisan proposal “very, very soon.”
“We’re going to do it this year,” Boozman said, teasing a possible committee vote on their share before Thanksgiving.
Booker said separately that he and Boozman were working as fast as possible, but that crafting good policy was more important than meeting a particular timeline.
Bipartisan negotiators on the package before the Senate Banking Committee also met outside the chamber. Several expressed optimism this week that an agreement on the new rules would be reached in their jurisdiction in the coming weeks.
Other Banking Committee members, including Sens. Cynthia Lummis (R-Wyo.), Ruben Gallego (D-Ariz.) and Angela Alsobrooks (D-Md.), touted the resumption of bipartisan talks, with a smiling Lummis raising her fingers crossed when asked if they could get the bill out of committee by Thanksgiving.
Banking Committee Chairman Tim Scott (R-S.C.) “is encouraged by the resumption of bipartisan negotiations on market structure, and he looks forward to working with his colleagues to advance meaningful legislation,” said spokesman Jeff Naft.
However, another Republican member of the Banking Committee, Sen. John Kennedy (La.), suggested the bill was not yet ready. He said a public hearing was needed and most senators still didn’t understand the problem.
Outstanding Questions
One issue raised by Democrats, opposed by Republicans like Sen. Bernie Moreno (R-Ohio), is the reopening of a law passed earlier this year governing stablecoins to strengthen the ban on issuers of these assets paying interest. The banking lobby, which fears that a flood of deposits will be siphoned into stable accounts, has pushed to add exchanges and other third parties to this restriction.
“My goal would be to get out of committee before Thanksgiving and be passed into law by mid-December,” said Moreno, a banking panel member and industry backer. “It’s just about doing the right thing, making sure that we secure American leadership and that we have a good regulatory framework that everyone is happy with.”
The Senate Finance Committee is separately hoping to find bipartisan agreement on legislation clarifying how the tax code treats digital assets.
Lummis introduced legislation on this topic earlier this year, which has the support of some tax writers in the Republican Party. Sen. Steve Daines (R-Mont.) and Rep. Max Miler (R-Ohio), both members of tax writing committees, have been working on other potential tax frameworks.
At a hearing this month, senators from both parties expressed interest in a bipartisan crypto tax bill. But rules for small transactions likely remain a major obstacle to the deal.
The Finance Committee’s work will likely take longer than that of other panels, in part because a tax bill will likely need to pass the House first, Lummis said Thursday.
But Lummis was optimistic given support from top tax writers, including House Ways and Means Committee Chairman Jason Smith (R-Mo.).
“Things are looking pretty good,” Lummis said.
A short period of time
Top lawmakers warn they have a small window to act before the midterm political season dampens any remaining appetite for bipartisan deals in a Republican-controlled Washington.
Crypto-focused super political action committees, already looking toward next year’s federal elections, are building a war chest of about $263 million to bolster their allies and seek to unseat their antagonists.
Any deal on crypto would risk fracturing the Democratic caucus, including progressives warning of Trump’s executive order facilitating crypto in the $13 trillion 401(k) retirement account market, as well as tax writers concerned about criminals’ penchant for using crypto to launder funds.
“As soon as there’s a hole in the guardrails, then bad actors will flock there,” said Sen. Elizabeth Warren (Mass.), tax editor and the top Democrat on the Banking Committee.
Lawmakers from both parties also believe rank-and-file members will need to be better educated before they have enough buy-in to approve legislation. Previous crypto legislation has been narrower in scope, such as the regulation of stablecoins or the deregulation of decentralized finance platforms.
“We need a much better understanding here of what crypto actually is,” said Rep. Richard Neal (D-Mass.), the ranking tax-writing member of the House Ways and Means Committee. “There is a huge level of risk here.”
