One way or another, the US crypto industry is likely to receive an official policy defining which digital assets receive what treatment from which federal agencies. The problem: it might not last.
Securities and Exchange Commission Chairman Paul Atkins is working to reverse the “head in the sand” approach he accuses his predecessors of taking to crypto policy, and he is ready to issue rules that will give the industry the regulatory clarity it needs. The problem, however, is that these rules will not be locked in and can be erased by the same type of vote from the commission that put them in place. They will not be supported by targeted legislation that would make them unassailable by future administrations.
“We need a solid legal foundation to avoid any rollbacks in the future,” Atkins told the Senate Banking Committee in testimony Thursday. While he is enthusiastic about giving the industry innovation-friendly rules, they are not “future-proof.”
But legislation in the U.S. Senate that would govern such things is failing. Crypto executives and bankers have failed to reach a compromise on one of the sticking points of stablecoin rewards programs. And Democratic lawmakers haven’t received answers to a number of their top concerns, including fully staffing regulatory commissions and the risk of conflicts of interest when top government officials have deep business ties to crypto (most obviously, they say, President Donald Trump).
Sen. Mark Warner, one of the lead Democratic negotiators on the Digital Assets Market Clarity Act, which has yet to be heard by the banking panel, said there was still a large bipartisan group working hard on the bill.
“We want to get this done,” he said, signaling that Democrats have not yet given up on negotiations. “This must be done safely.”
Its main concern is decentralized finance (DeFi) and preventing bad actors from using it for illicit purposes. Warner’s views on this matter have at times shaken the industry and have been seen as a threat to the future existence of DeFi projects. But the latest discussions on the treatment of illicit financing in the bill have not yet resulted in an approach.
“We need to make sure we don’t put in place a regime that enables bad actors or excludes law enforcement,” Warner said.
A Republican lawmaker, Sen. Bernie Moreno, commiserated with the SEC chairman, saying, “Congress has failed miserably to give you laws. »
Atkins reiterated that his agency now has “fairly broad authority” to write rules that put crypto businesses on a clear regulatory footing, as he is trying to execute with his “Project Crypto” program. But, he added, the rules should be “backed up” by legislation.
“We need, I believe, good legislation from Congress,” Atkins said.
Read more: The big US crypto bill is underway. Here’s what that means for everyday users
So far, a similar version of the Clarity Act has already passed the House of Representatives last year. And last month, another version approved the Senate Agriculture Committee on a party-line vote. However, when it comes time for the Senate to vote on a final market structure bill, the industry will need at least seven Democrats like Warner — and potentially more, if Republicans are not unanimous.
While Senate Banking Committee Chairman Tim Scott sounded a hopeful note Thursday about the Clarity Act, even industry executives such as Coinbase CEO Brian Armstrong have shown a willingness to withdraw support if the policy doesn’t seem right. And Treasury Secretary Scott Bessent denounced crypto industry “nihilists” who are willing to stand in the way, saying they should move to El Salvador if they don’t want vigorous regulation.
How much support Atkins needs for the pending SEC rules remains unclear, although the White House has asked negotiators to find common ground before the end of the month. Time is of the essence, as French Hill, chairman of the House Financial Services Committee, said.
Read more: SEC’s Paul Atkins grilled on crypto enforcement takedown, including with Justin Sun, Tron
