US lawmakers invoke FTX and spar on direction of crypto bills

Members of the United States House Financial Services Committee seem to be divided on the best legislative path forward dealing with regulatory clarity for crypto and blockchain technology.

In a July 26 markup hearing, the committee had several bills on its agenda, including the Financial Innovation and Technology for the 21st Century Act, Blockchain Regulatory Certainty Act, and Financial Technology Protection Act of 2023 — all directly related to addressing the regulation of cryptocurrencies. Many lawmakers supported the first bill, claiming it would help address another failure like the collapse of the FTX exchange, while others criticized the measure as favoring crypto firms over consumers.

Committee chair Patrick McHenry said the Financial Innovation and Technology for the 21st Century Act would help clarify the authority the Securities and Exchange Commission and Commodity Futures Trading Commission had over payment stablecoins. However, ranking member Maxine Waters and others claimed the bill would still allow for the commingling of customer funds — as allegedly happened between FTX and Alameda Research — and required the development of an “entirely new regulatory structure” rather than relying on existing securities laws.

Key changes include:

✅ Revisions to pre-registration oversight of intermediaries
✅ Fine-tuned registration requirements
✅ Clarifies SEC & CFTC authority for payment stablecoins
✅ Increased CFTC funding

— Financial Services GOP (@FinancialCmte) July 25, 2023

The debate concerning the bill was not entirely split along party lines. Democratic Representative Jim Himes acknowledged that the legislation could have prevented the collapse of FTX, but also expressed ignorance about certain aspects of the crypto space, including the recent ruling in the SEC v. Ripple lawsuit on XRP (XRP) as a security. Massachusetts Representative Stephen Lynch referred to the bill as the “worst piece of legislation that has been presented for markup” in his roughly 20 years in government.

House Republicans said the bill would offer $120 million in funding to the CFTC to build up its resources addressing regulation of the crypto space, but some Democrats objected to how the funds would be redirected from the SEC, potentially limiting its capacity for enforcement. At the time of publication, lawmakers continued to debate the bills and proposed amendments, with a vote expected on July 26.

The bills are just a few of several proposed pieces of legislation aimed at addressing what many have called a regulatory gap in dealing with digital assets. The SEC has filed lawsuits against Coinbase, Binance and others in addition to enforcement cases against executives at FTX and Celsius.

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