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Regulatory Update: House Financial Services Committee Advances Crypto and Blockchain Bills

The House Financial Services Committee has taken a significant step forward in the regulation of cryptocurrencies and blockchain technology. In a landmark markup session, the committee voted in favor of two crypto-specific bills, H.R. 4763, the Financial Innovation and Technology for the 21st Century Act, and H.R. 1747, the Blockchain Regulatory Certainty Act. This is the first time that crypto-related bills have been advanced on their own merits, separate from broader legislative packages.

The bills aim to provide a unified legal framework for the crypto industry while addressing various blockchain-related issues. However, the discussion during the markup session was not without its challenges. Lawmakers had to contend with the recent controversy surrounding crypto exchange FTX, which loomed large over the proceedings. Despite this, a majority of lawmakers eventually supported the bills, referring them to the full House of Representatives for a final vote.

One particular point of contention was a clause in the market structure bill that would allocate more power to the Commodity Futures Trading Commission (CFTC). Critics from both the Republican and Democratic parties raised concerns about this provision, fearing that it could weaken consumer protections provided by the long-standing securities laws and potentially leave U.S. investors more vulnerable to fraud.

However, the committee's chair, Rep. Patrick McHenry (R-N.C.), lauded the legislation, emphasizing the importance of regulating the crypto space to avoid falling behind other countries. He highlighted the need to recognize that not all digital assets are securities, even if they are offered as part of an investment contract.


One key concern among Democrats was the bill's proposal to grant the CFTC more regulatory authority over the digital assets space without increasing its funding. Democrats expressed worries that the CFTC might not be as stringent in regulating crypto companies compared to the Securities and Exchange Commission (SEC), potentially enabling fraudulent activities. On the other hand, Republican supporters argued that the recent approval of an additional $120 million in funding for the CFTC would provide the necessary resources for effective regulation.

Republicans also emphasized the importance of passing the legislation swiftly to bring clarity to the crypto industry. They argued that having a clear regulatory framework would prevent the SEC's alleged harsh crackdown on the sector and incentivize crypto companies to remain in the U.S. rather than relocating to more crypto-friendly jurisdictions.

The Road Ahead

While the House Financial Services Committee's progress is a significant step forward, there are still further legislative steps to be taken. The House Agriculture Committee will conduct its markup of the Financial Innovation and Technology for the 21st Century Act, and the Financial Services Committee will focus on stablecoin legislation.

At the same time, the Senate has also been taking action regarding the crypto industry. The Senate added anti-money laundering provisions for crypto to a must-pass defense bill, the National Defense Authorization Act. This amendment requires various regulators to create a risk-focused examination and review process for financial institutions to assess crypto-related risks, ensuring compliance with anti-money laundering programs and the law. The Treasury Department is also tasked with analyzing mixers and privacy-enhancing technologies or services used with crypto assets and proposing any necessary legislation to address concerns.

Overall, the House Financial Services Committee's approval of the crypto and blockchain bills is a significant development in the ongoing efforts to regulate the crypto industry. It signals a growing recognition of the importance of establishing clear guidelines to foster innovation while safeguarding investors and consumers. However, further discussions and actions are still needed to shape the future regulatory landscape for cryptocurrencies and blockchain technology in the United States.


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