Regulation
Pelosi Could Support Industry-Friendly Cryptocurrency Bill
Speaker Emeritus Nancy Pelosi (D-CA) is considering voting for a Republican-backed cryptocurrency bill when it comes up for a vote this week in the House, according to sources familiar with her thinking.
The bill, known as l Financial Innovation and Technology for the 21st Century Act (FIT 21), was put together by Republicans on the House Financial Services Committee and represents the most comprehensive effort to regulate cryptocurrencies to date, mostly along industry-friendly lines. The bill could also open loopholes for other financial instruments outside of cryptocurrencies, experts say Prospect. A Rules Committee meeting on FIT 21 will take place later today, with a floor vote likely as early as Wednesday.
Pelosi is no longer in Democratic leadership, but her views still carry weight among many House Democrats. He also remains one of the Democratic Party’s most prodigious fundraisers, at a time when the cryptocurrency industry has provided large sums of campaign contributions over the past two election cycles. House Republicans’ decision to give FIT 21 a vote allows crypto PACs to definitively see where members of Congress stand on the issue before November and target spending accordingly.
If Pelosi supports the bill, she would break with the ranking Democrat on the Financial Services Committee, Rep. Maxine Waters (D-CA), who opposes FIT 21, along with Rep. Brad Sherman (D-CA), a other senior member. in Pelosi’s California delegation. In a communication to House Democrats, the leadership did not say it would take up the bill, only saying that Waters and other senior members “strongly” opposed it.
In 2022, Pelosi ran the House Majority PAC, the super PAC supporting House Democrats, when received 6 million dollars by disgraced billionaire Sam Bankman-Fried to support a candidate in Oregon’s open-seat Democratic primary. (That candidate, Carrick Flynn, lost the primary.) Pelosi he personally received $2,900 by Nishad Singh, chief technical officer of FTX, Bankman-Fried’s bankrupt cryptocurrency exchange.
Coinbase, one of the largest currency exchange platforms, no longer has a physical headquarters but spent the first eight years of its life as a company based in San Francisco’s Pelosi neighborhood. Coinbase CEO Brian Armstrong has already lobbied for more lenient crypto regulation in Washington, even before taking a selfie with Pelosi in 2021. The company name is on a coalition letter endorsing FIT 21 sent to House leaders last week.
In response to a question from ProspectPelosi Speaker Aaron Bennett said he did not yet have an answer on her position on the bill.
FIT 21 TACKLES THE THRESHOLD QUESTION in the regulation of cryptocurrencies: what counts as a commodity, and is therefore regulated by the Commodity Futures Trading Commission (CFTC), and what counts as a security, with oversight entrusted to the more rigorous Securities and Exchange Commission (SEC).
The bill would define all digital assets on a “decentralized” blockchain as a commodity and also give the CFTC regulatory authority over cash or spot cryptocurrency markets. This definition means that most digital currencies and coins would be subject to the CFTC’s regulatory regime, and even for those cryptocurrencies defined as securities, there would be several exceptions to SEC regulation. Stablecoins, pegged to the dollar and used to facilitate cryptocurrency trading, would have only limited federal regulatory oversight.
In other words, the bill offers what the industry has long sought: a regulatory regime dominated primarily by the CFTC, which has been much more accommodating to the industry. The coalition’s letter states that the legislation would help “accelerate the growth of blockchain technology and digital assets, fostering financial inclusion and protecting national security.”
Waters and other Democrats held a briefing for members and staff on FIT 21 on Monday, firmly rejecting the measure. They were financial reform groups attacking him For me yes. “This is a bill that, rather than creating regulatory standards for the cryptocurrency industry, seeks to rewrite financial regulations to benefit cryptocurrencies,” says Mark Hays, senior fintech policy analyst at Americans for Financial Reform.
The bill offers what the industry has long sought: a regulatory regime dominated primarily by the CFTC, which has been much more accommodating to the industry.
In particular, supporters challenge Title II of the bill, which would change the consolidated “Anyway, try” to determine what counts as security. The Howey test states that an “investment of money in a joint venture, with a reasonable expectation of profits from the efforts of others” is a security. But FIT 21 would change that standard, effective by the Securities Exchange Act of 1934, for digital assets. This would keep them out of SEC oversight.
Hays says this “creates a road map for other Wall Street players to use the same rubric,” meaning other investment contracts could be written outside of cryptocurrencies, whose assets would be exempt from securities laws.
Pelosi may not have 90-year-old financial regulatory statutes in mind when considering the bill, but the realities of 21st century elections. AS THE Prospect he reported, Bankman-Fried’s conviction for criminal fraud did not slow the flow of cryptocurrencies into the Democratic primaries. As of April, the industry had raised $80 million for the 2024 elections. Numerous Democratic members have recently been elected, from Senator John Fetterman (D-PA) to Representative Ritchie Torres (D-NY), himself a sponsor of FIT 21, with the support of the cryptocurrency industry.
The effort has paid off for crypto companies. Thirty-two Democrats in the House and Senate he joined the Republicans last week voted to rescind the SEC’s guidance on cryptocurrency accounting, a resolution that President Biden vowed to veto. Pelosi was not among them 21 House Democrats who voted in favor of the resolution, but on the Senate side it was Majority Leader Chuck Schumer (D-NY). among the votes yes.
Schumer also tried without success conclude an agreement in the FAA reauthorization bill to include industry-favored legislation regulating stablecoins. There was speculation that Schumer was trying to protect Democratic Senators Sherrod Brown (D-OH) and Jon Tester (D-MT), who were threatened by electoral expenses by the cryptocurrency industry against their re-elections.
In his Senate race this year, Rep. Adam Schiff (D-CA), a Pelosi protégé, added pro-cryptocurrency messaging to his campaign website, saying he would ensure “the United States remains the global leader in these important new technologies.” As a result, she received an “A” rating from an outside group called Stand With Crypto, and her Democratic primary opponent, Rep. Katie Porter (D-CA), was hit with $10 million in negative ads funded by the sector.
Several House Democrats have already lined up to support FIT 21, including Rep. Ro Khanna (D-CA) and co-sponsors Reps. Torres, Wiley Nickel (D-NC), and Henry Cuellar (D-TX), who has been recently indicted on corruption charges. House Democratic support could determine whether the Senate feels the need to take up the bill, although that is currently considered unlikely. Pelosi’s decision would significantly determine where those numbers would end up.
The potential financial gain from supporting cryptocurrencies, and the rush to oppose them, are driving democratic decision-making, Hays says. “It’s not about supporting cryptocurrencies, it’s about trying to overcome the threat of super PAC promises.”