Save the Date: Senate Banking Committee Sets Watershed Crypto Hearing

Hope springs eternal but mark your calendar for Valentine’s Day because our industry will want to keep a close eye on the Feb. 14 Senate Banking Committee hearing titled “Crypto Crash: Why Financial Safeguards are Needed for Digital Assets.”

This committee is widely viewed as a bottleneck for regulatory efforts, which have made more progress in the House Financial Services Committee and Senate Agriculture Committee.

If new Banking Committee Chair Sen. Tim Scott, R-SC, and committee minority leader Sen. Sherrod Brown, D-OH, find common ground, the body could become a key venue for what Congress produces on crypto regulation, Coindesk argues.

Brown is an outright crypto skeptic, while Scott is still a blank page, though he has signaled concerns over the worst crypto headline issues from 2022, as we mentioned earlier today. Still, there are plenty of reasonable voices emerging in the new Congress who are pro-crypto, even as the industry lost a few key supporters, like Sen. Pat Toomey, R-PA, who retired last year.

The crypto industry’s 2022 dramas will again fall under the U.S. Senate’s microscope this month when the Senate Banking Committee holds a Feb. 14 hearing to examine financial system protections from the dangers seen in digital assets.

The panel is calling the Valentine’s Day hearing “Crypto Crash: Why Financial System Safeguards are Needed for Digital Assets,” according to a hearing schedule released Friday, and its position as one of the first issues to be addressed by the lawmakers demonstrates the urgency of crypto issues in Congress.

Chairman Sherrod Brown (D-Ohio) indicated in a November letter to Treasury Secretary Janet Yellen that he wants to begin a serious effort toward U.S. government oversight of crypto, and the committee’s new ranking Republican, Sen. Tim Scott (R-S.C.) said in a statement on Thursday that the members “should work to facilitate a bipartisan regulatory framework.”

The framing of the new committee’s first crypto hearing leading off with “Crypto Crash” doesn’t really bode well.

Consensus Magazine says the conventional wisdom emerging boils down to Republicans and Democrats taking sides in a way that may not be helpful for any regulatory efforts.

In the room where it happens (to borrow the earworm from "Hamilton") there’s a stench of crypto’s misdeeds. And the industry won’t have to wait long before getting the first sense of where it now stands in Washington.

“It‘s going to come a lot sooner than folks think,” said Ron Hammond, director of government relations at the Blockchain Association, who expects the relevant committees to get back into investigating the FTX debacle within the next few weeks. “They’re ready to hit the ground running.” Crypto is among topics getting the most immediate attention in the House Financial Services Committee and the Senate Banking Committee. The industry is finally earning the priority status it desperately wanted, but for the wrong reasons.

Headline-conscious lawmakers – many of them recipients of those FTX dollars – will get some early messaging off their chests before legislating begins in earnest. And the political party divide will become starker, dulling the conspicuous joy the industry once felt from how nonpartisan the work was.

The new Republican line: Blame crypto’s missteps on the humans. Don’t indict the innovative technology!

From Democrats: Crypto is an untamed beast that steals people’s life savings and doesn’t seem useful for anything.

"The collapse of FTX definitely has an impact on the way people in the Congress think about this,” Rep. Jim Himes (D-Conn.) told CoinDesk TV earlier this month.

U.S. lawmakers have so far produced no significant laws to establish crypto oversight, despite a number of legislative efforts last year that fizzled out. To change that in this newly divided Congress, the Republicans will have to acknowledge their House majority is razor-thin, and they’ll need some cross-party partnership to move anything in the next two years.

“Nothing is going to happen unless it’s bipartisan,” said Parker Hamilton Poling, a former executive director of the National Republican Congressional Committee who was once chief of staff for Rep. Patrick McHenry (R-N.C.), the new chairman of the House Financial Services Committee.