Capitol Hill's Safe Haven For Crypto

Crypto advocates who have been beaten down and who want to vent about Washington regulators now have a new place to gather: The House Financial Services Committee.

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As Republicans opened their doors to the public on Thursday for a hearing that was clearly political in nature, based on its title alone: "Coincidence or Coordinated? Regarding the Administration's attack on the Digital Asset Ecosystem."

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It was a first step taken by Republicans – supported by testimony from cryptocurrency executives and a former Trump administration bank regulator – to make the argument that Congress should intervene with a new rulebook in order to protect the industry from a crackdown imposed by the U.S. government under decades-old regulations in the midst of a crackdown. There is good news for crypto firms who have had it with the SEC and federal banking agencies, as they are fed up with them.

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FTX collapse, which stunned the Washington crypto debate by revealing indisputable evidence of mismanagement across the entire industry, was the catalyst for the gathering, which was an attempt to move on from the fallout of the collapse. Since the debacle, crypto skeptics on Capitol Hill have grown stronger and have made it much harder for industry-friendly bills to pass.

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The House Republicans are now leveraging the current meltdown as an opportunity to push ahead with a comprehensive digital asset bill that goes beyond the smaller-scale measures the committee has been focusing on so far.

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The Chairman of the subcommittee on digital assets, where the hearing took place, French Hill, has tried to make it clear that he holds a degree of skepticism on crypto's place in the economy in his new capacity as the chairman of the subcommittee. In a recent interview, he stated that he is a strong advocate of "same risks, same activities, same rules." He wishes to create "a functional framework that is tailored specifically to the risks associated with digital assets."

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The questions he asked indicated that he was on the Republican side of things. There is a certain amount of criticism coming from the crypto industry about the SEC and federal banking regulators' approach to the crypto space - casting doubt on the "come in and register" pitch made by the SEC and building a record of potential regulation customized to the crypto field.

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“I think we all recognize that no matter what kind of regulatory framework we are in, we can still have enormous financial challenges and criminal issues as well," he said, noting the dot-com bust and the housing crisis as examples. “As far as I'm concerned, you are better off with that regulatory framework in my opinion."

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As crypto executives get pummeled elsewhere in Washington, they love Washington's open-minded approach much like they love the open-minded approach here (a top Fed official recently compared crypto investment to tulip mania on Thursday morning).

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In MM's testimony on Thursday, Coinbase's chief legal officer Paul Grewal said that he was confident that whatever set of standards [House Financial Services Chair Patrick McHenry] might propose would not only reflect market realities but also the need to protect consumers and investors from harm. “As a person who has a lot of trust in his care and attention, I have a lot of confidence in them.”