House prepares for historic vote on cryptocurrencies as political tides shift

The vote is here.

When I started covering the beat, Sam Bankman Fried roamed the halls of Congress, handing out donations to anyone who attended a meeting in hopes of advancing cryptocurrency legislation. The strategy almost worked, with the Senate Agriculture Committee close moving forward a bill right before FTX’s collapse ruined its prospects. After the series of high-profile collapses and the transformation of cryptocurrencies into a punching bag in Congressional hearings, the industry’s political fortunes seemed dead in the water.

Over a year later, the blockchain industry has witnessed a stunning reversal of fate. Today, the House will vote on a comprehensive piece of legislation that would establish an oversight framework around the “market structure” of cryptocurrencies, meaning it would outline the separation of powers between the Securities and Exchange Commission and the Commodity Futures Trading Commission, as well as create rules of the road for other key issues such as commingling and custody. All signs point to a favorable outcome, even if the bill faces a less rosy future in the Senate.

Regardless of whether the bill – called the Financial Innovation and Technology for the 21st Century Act, or FIT21 – becomes law this session (probably not), it is a notable achievement for the industry. So what has changed? Crypto has maintained political allies in Washington, chief among them Rep. Patrick McHenry (R-N.C.), chairman of the House Financial Services Committee, who is retiring at the end of this term. Even though McHenry lost his partner across the aisle, Rep. Maxine Waters (D-Calif.), he managed to throw her party and a handful of Democrats– at his side.

This political calculus became even easier after last week’s vote in the Senate on a more modest piece of cryptocurrency legislation to overturn a controversial SEC bulletin that would limit banks’ ability to hold cryptocurrencies. The bill received surprising bipartisan support, including from Majority Leader Chuck Schumer (D-N.Y.). In response, House Democrats decided do not whip – or solicit “no” votes – against FIT21. Yesterday, American Prospect reported that Rep. Nancy Pelosi (D-California) could also support the bill. In a briefing yesterday, senior committee staff involved in drafting the legislation said there had been “constant engagement” since last summer, when FIT21 was adopted. voted from both the House Financial Services and Agriculture Committees, but the waters have certainly become less choppy.

The bill still faces its challenges. SEC Chairman Gary Gensler released a lengthy statement this morning arguing that FIT 21 would erode nearly a century of investor protection laws, and key figures including Waters remain strongly opposed to the legislation. And despite former President Donald Trump attempt to turn cryptocurrencies into a wedge issue, along with tens of millions of dollars coming in donations coming from the sector: it is not yet clear whether voters will be motivated by the prospect of financial regulation. While today’s vote marks a significant step forward for cryptocurrencies, the industry will need to maintain momentum after the next congressional elections if it is to have any hope of enacting the legislation.

Yesterday, in a press conference with journalists, McHenry appeared optimistic. “My term in Congress is coming to an end, but politics is not coming to an end,” he said. “This policy is inevitable. It will happen, just as the cryptocurrency world is here to stay, even though he has been proclaimed dead many, many times.”

Leo Schwartz
leo.schwartz@fortune.com
@leomschwartz

DECENTRALIZED NEWS

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The decentralized Twitter competitor Farcaster raised a $150 million round led by cryptocurrency VC firm Paradigm. (The block)

THE trump The campaign announced it will begin accepting cryptocurrency donations as the presidential candidate becomes closer to the industry and his political donations. (Blocks)

Some Bitcoin analysts turn to an unusual source of insight: astrology. (Wired)

THE Brazilian The central bank has announced that it will begin sharing regulatory proposals to oversee cryptocurrency providers later this year. (Reuters)

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