As cryptocurrency prices surged last week, the public learned that House Republicans are forming a subcommittee on cryptocurrencies. The announcement could signal the beginning of the end of US regulatory ambiguity around blockchain and digital assets.
“Strange, right? Every man’s life touches many other lives. And when it’s not there, it leaves a terrible hole, doesn’t it?” — Clarence, “It’s A Wonderful Life” (1946 Christmas drama about a banking panic).
Dealing with a big hole
Rep. Patrick McHenry, a Republican in the North Carolina delegation, said Thursday that he plans to create the new cryptocurrency subcommittee.
He says he will face “a big hole in how we structure the committee” to deal with cryptocurrencies. McHenry was referring to the House Financial Services Committee, for which he is the incoming chairman for the 118th United States Congress:
“We have to answer for oversight and policy making on a new asset class.”
The announcement of a new crypto panel House coincided with a massive bull run in cryptocurrency prices. Over $600 million in BTC shorts were liquidated as Bitcoin price surged to $21,000. The overall cryptocurrency market cap increased to $1 trillion as altcoins posted double-digit gains.
After a year of rolling towards lower and lower support levels, the cryptocurrency exchange market has finally shown some spirit. Perhaps all it needed was some consumer confidence and hope for some regulatory clarity.
Following the fall of FTX in November, Republican McHenry joined Democrat Representative Maxine Waters (CA) in calling for a bipartisan bill on cryptocurrencies.
Following a series of devastating defaults among various cryptocurrency startups, consumers and investors may welcome regulation from Congress. It could also clarify the future of many projects by resolving the turf war between US regulators.
For example, the SEC has pushed for scrutiny over the regulation of cryptocurrencies. But the Commodity Futures Trading Commission says that Bitcoin (BTC) and Ether (ETH) are commodities.
Meet The House Republican who may decide the future of Crypto
A rule enacted by Republican congressional legislation may mean no burden on the cryptocurrency industry. It certainly could, for example, if Bitcoin were defined by law as security. But that may not be the case.
A year ago, the Republican president of financial services tweeted:
“Congress must fully understand these new innovative technologies, such as #crypto. We don’t need knee-jerk reactions from regulators to regulate out of fear of the unknown.
McHenry also encouraged policy makers to question whether they are taking cryptocurrency seriously and to understand it well enough to make sensible proposals about it as well:
“Mind you, this technology is already regulated. The question for policymakers is whether you know enough about this technology, which is neither fish nor fowl, to have a serious debate.”
One indication that the Republican-led crypto subcommittee’s new rules may not be onerous is McHenry’s stance on payday loan regulations. He advocated a 2020 Trump-era Republican rule change to ease compliance burdens for payday lenders issuing high-interest loans.
Its main contributors are Alphabet Inc, a tech titan; Signature Bank, a New York commercial banking giant; and MetLife, Inc., an insurance company. There is a lot of overlap there with the concerns and economics of the cryptocurrency business.
Whatever happens next, the cryptocurrency and traditional finance markets will be watching and strategizing for their future.
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