Crypto Chatter Speeds Up in Congress Amid Shutdown (1)

Bipartisan talks on a broad crypto regulation package, previously stalled by the shutdown, are now heating up, with Republicans pushing for multiple committees to consider legislation.

Crypto is a rare bipartisan spot on Capitol Hill this year as the industry clamors for clarity on how digital assets fit into regulations and the tax code. But lawmakers have to solve a number of policy questions first.

Senate Agriculture Committee Chair John Boozman (R-Ark.), whose panel has jurisdiction over digital assets treated as commodities, is working daily with committee member Sen. Cory Booker (D-N.J.) to finalize their part of a bill establishing a regulatory regime, and plan to release a bipartisan proposal “very, very soon.”

“We’re going to get it done this year,” Boozman said, teasing a possible committee vote on their portion before Thanksgiving.

Booker said separately that he and Boozman are working as fast as they can, but it’s more important to get the policy right than meet a particular timeline.

Bipartisan negotiators on the package before the Senate Banking Committee have also been meeting off the chamber’s floor. Several expressed optimism this week about reaching a deal on the new rules 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 resumption of the bipartisan talks, with a smiling Lummis holding up her fingers crossed when asked if they could get the bill out of committee by Thanksgiving.

Banking Committee Chair Tim Scott (R-S.C.) “is encouraged that bipartisan negotiations on market structure have resumed, 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 wasn’t yet ready to go. He said it needs a public hearing and said most senators still don’t understand the issue.

Outstanding Issues

One issue Democrats have raised, but Republicans like Sen. Bernie Moreno (R-Ohio) oppose, is reopening a law enacted earlier this year governing stablecoins to tighten up a ban on issuers of those assets paying interest. The bank lobby, which fears a flood of deposits being siphoned into stablecoin accounts, has pushed to add exchanges and other third parties to that restriction.

“My goal would be out of committee before Thanksgiving and into law sometime in mid-December,” said Moreno, a banking panel member and industry backer. “This is just about doing the right thing, making sure that we ensure American leadership, that we have a good regulatory framework that everybody’s happy with.”

The Senate Finance Committee separately hopes to find bipartisan accord in legislation that clarifies how the tax code treats digital assets.

Lummis introduced legislation on this topic earlier this year that has the support of some GOP tax writers. 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.

Senators in both parties at a hearing this month expressed interest in a bipartisan tax bill for crypto. But rules for small transactions likely remain a key hurdle to accord.

The Finance Committee’s work will likely take longer to come together than other panels, in part because a tax bill would likely need to pass the House first, Lummis said Thursday.

But Lummis was optimistic given support of key tax writers, including House Ways and Means Committee Chair Jason Smith (R-Mo.).

“Things are looking pretty good,” Lummis said.

A Short Time Frame

Key lawmakers warn they have a small window to act before the midterm political season sours any remaining appetite for bipartisan dealmaking in Republican-controlled Washington.

Crypto-focused super political action committees, already looking to next year’s federal elections, are building up a war chest of around $263 million to boost their allies and seek to unseat their antagonists.

Any deal on crypto would risk fracturing the Democratic caucus, including progressives warning against Trump’s executive order easing crypto into the $13 trillion 401(k) retirement accounts market, as well as tax writers concerned about criminals’ penchant for using crypto to launder funds.

“The minute there’s a hole in the guardrails, then the bad actors will flow through it,” said Sen. Elizabeth Warren (Mass.), a tax writer and the top Democrat on the Banking Committee.

Lawmakers in both parties also think rank-and-file members will need to be better educated before there’s enough buy-in to clear any legislation. Past crypto legislation was narrower in scope, such as regulating stablecoins or deregulating decentralized finance platforms.

“We need a far better understanding here about what crypto really is,” said Rep. Richard Neal (D-Mass.), the ranking member on the tax-writing House Ways and Means Committee. “There’s a huge risk level here.”