The crypto industry is making a big push in Washington to lobby lawmakers to pass new rules to regulate the currency.
The movement, which organizers are calling “Stand with Crypto,” has been led by the crypto exchange Coinbase (COIN) and more than 50 founders of crypto companies. They took to Capitol Hill on Wednesday to warn lawmakers that without new industry-friendly regulation, they would lose jobs overseas.
“This is going to be kind of like our 5G or semiconductor moment where in five years, we’ll be thinking, how do we get this back onshore if we don’t do something now,” Coinbase CEO Brian Armstrong told Yahoo Finance Live in an exclusive interview.
“We don’t have clear rules on the books like 83% of the rest of the G-20 countries for how crypto should be regulated, consumers should be protected, and how this innovation can happen here in the US,” he said.
One option that Coinbase and others have pushed for is legislation that passed the House Financial Services Committee this summer on a bipartisan basis. That legislation seeks to create clarity around gaps between the rules of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC), while also outlining what criteria would cause a crypto token to be classified as a commodity or as a security.
It also tries to direct what firms need to do to register with the SEC and requires the SEC to write new rules that are customized to govern crypto. That legislation is expected to pass through the House this fall, though lawmakers have been grappling with other priorities of late — namely, a looming government shutdown, as well as the must-pass Farm Bill and National Defense Authorization Act.
In any case, analysts don’t expect the crypto legislation to go anywhere in the Senate.
“We do not see a path forward for this through the end of 2024. Democrats object to giving the CFTC authority over so much of the crypto universe as it has no experience with retail investor protections,” said TD Cowen analyst Jaret Seiberg. “By contrast, crypto wants to diminish the role of the SEC and boost the power of the CFTC.”
But Armstrong says he thinks there’s a reasonable set of places where new rules could land and that lawmakers tell him they are all attuned at a high level to the risks of not doing so. He hopes the House bill will converge with legislative efforts by Sens. Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (D-N.Y.), who have put forth sprawling, comprehensive legislation to regulate the crypto industry in the upper chamber.
“I’m OK with any of them,” Armstrong told Yahoo Finance. “I just want there to be clear rules because in the absence of that the SEC has just been on this path of regulation by enforcement or harassment, if you will, where every startup in the space gets a subpoena or a Wells notice and that’s not sustainable,” he added.
Armstrong warned if Congress doesn’t pass legislation, then the legal system will be forced to decide.
“Right now, the SEC has … won zero of the last three court rulings. So the courts are repudiating the approach that they’re taking,” Armstrong said. “Eventually, if this ends up in the Supreme Court, that’s not going to be good for many of what these lawmakers want.”
Heads of smaller crypto firms were also part of the broader push on Capitol Hill, as they attempted to show lawmakers that the industry can help boost the economy.
“It’s really important that everybody understands that blockchain technology is used across multiple different industries — from supply chain, financial services, to retail, communications, and security,” said Nina Blankenship, co-CEO of Crypto Tutors LLC, a Black- and minority-women-owned business based in Orlando, Fla., that offers Web3 and blockchain education.
‘Fraud, manipulation, and scams’
While Armstrong and crypto small business heads were on Capitol Hill, SEC Chair Gary Gensler testified Wednesday before the House Financial Services Committee, reiterating his view that the crypto industry is “rife with fraud, manipulation, and scams.”
“The American public is still getting hurt by the noncompliance in this field,” Gensler said. “Unfortunately … we brought numerous cases in this field to try to protect the American public and be a cop on the beat with regard to so many of these schemes.”
But Coinbase and much of the crypto industry feel the SEC’s approach to regulating crypto has become hostile.
“Everybody deserves equal treatment under the law, and the SEC cannot continue to punish crypto even if they wish that it was something else,” he said.
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