Digital asset legislation is not dead yet, Republican lawmakers say

Congress will enact digital asset legislation, said House Financial Services Chair Patrick McHenry, R-N.C., and Sen. Cynthia Lummis, R-Wyo., on Sept. 17 at Georgetown University. However the two lawmakers, who are proponents of two different cryptocurrency-focused bills, disagreed on when Congress will get something done.

“I do think we're going to get something done during the lame duck (session),” which is the period of time that Congress is in session after November’s election, but before the end of the year, Lummis said at the Financial Markets Quality Conference, hosted by the Georgetown Psaros Center for Financial Markets and Policy.

Lummis called herself an “optimist,” speaking directly after McHenry, who joked that his “expectations for Congress doing anything are low.”

“I don’t know if that happens this calendar year,” McHenry continued, acknowledging that the lame duck session does present an opportunity for passage. “But if it doesn't happen this Congress, it will happen. It will happen because there is momentum in both parties for clear rules of the road and keeping pace with” other countries that are already taking action.

McHenry has been a strong advocate of the Financial Innovation and Technology for the 21st Century Act, or FIT 21 Act, which passed out of the House Financial Services Committee in July 2023, and passed the House in a 279-136 vote in May.

McHenry highlighted that vote, which garnered the support of 71 Democrats, as proof that there’s a path to compromise on digital asset legislation.

When it comes to regulating digital assets, there is well-known disagreement between the Securities and Exchange Commission and Commodity Futures Trading Commission on how to do so, which McHenry also acknowledged.

“From Capitol Hill, we see two regulators that we created, and they're fighting,” he said. “And just like any good parent, you have to step in when the kids are fighting. We've stepped in and we have made the decision (in this bill) on what is a digital commodity (and) what is a digital security.”

The FIT 21 Act specifically designates the SEC as the regulator for the digital securities market, while also giving the CFTC new authority over the digital commodities market, which CFTC Chair Rostin Behnam said is needed.

Speaking earlier at Georgetown, Behnam said that the CFTC’s lack of authority in the market “puts me and my agency at a situation where we're always on our back foot. We're always reacting to fraud, we're always reacting to misconduct, and we're bringing cases, we're levying a lot of penalties, but ultimately, I want to protect markets…(and) protect investors before the fraud occurs.”

Lummis has proposed her own legislation in collaboration with Sen. Kirsten Gillibrand, a Democrat from New York, known as the Lummis-Gillibrand Responsible Financial Innovation Act. That bill, reintroduced in the Senate in July 2023, similarly splits up jurisdiction of digital assets between the SEC and CFTC, along with a host of other provisions.

However, the bill falls under the jurisdiction of the Senate Banking Committee, under which Lummis said she and Gillibrand “can’t get anything through.”

Instead, she has turned her attention to advancing a different bill in the Senate Agriculture Committee, which hasn't officially been introduced yet, but Committee Chair Debbie Stabenow, D-Mich., has made known she is working on it.

Stabenow, the committee's ranking member John Boozman, R-Ark., and Sens. Cory Booker, D-N.J., and John Thune, R-S.D., first proposed a crypto bill back in 2022 called the Digital Commodities Consumer Protection Act, but the bill never went anywhere after the collapse of former crypto exchange FTX. The bill would have focused on expanding authorities for the CFTC, as it would have required all digital commodity platforms, including trading facilities, brokers, dealers and custodians, to register with the agency. Stabenow has said her new bill would also focus on expanding authority for the CFTC.

If Stabenow's new bill passes out of committee, Lummis said she believes it stands a chance to serve as a larger financial services bill with several amendments. Overall, she emphasized that any legislation should be passed sooner rather than later.

“The United States puts itself at a strategic disadvantage with regard to financial services related to digital assets if we don't put a clear regulatory framework in statute,” she said.