Good morning and happy Friday on another historic week in crypto policy.
Top Points
The Senate passed a SAB 121 repeal resolution by a 60-38 vote, sending the bill to President Biden who plans to veto the measure.
It's the first standalone crypto bill to pass Congress.
The House passed three bipartisan bills with pro-blockchain provisions, including legislation to promote blockchain-based applications in commerce, reduce fraud, and improve supply chain resiliency.
Senators Ron Wyden (D-OR) and Cynthia Lummis (R-WY) urged the DOJ to refrain from subjecting self-custody software developers to criminal liability as unregistered money transmitters.
Ahead of an expected floor vote next week, the House unveiled updated text and proposed amendments for the Financial Innovation and Technology for the 21st Century Act ("FIT 21").
Senate Passes SAB 121
On Thursday morning, 60 Senators voted to repeal SAB 121 via a Congressional Review Act resolution of disapproval, sending the resolution to President Biden's desk.
12 Democrats - including Senate Majority Leader Chuck Schumer (D-NY) - joined Republicans in voting yes on repeal.
NEW: @SenSchumer leads 12 Democrats in joining all Republicans to pass the resolution to nullify SAB121Here’s the list of Democrats
Casey
Peters
Gillibrand
Kelly
Hickenlooper
Booker
Tester
Rosen
Sinema
Lujan
Wyden
Schumer
575
What's Next?
President Biden now has 10 days (excluding Sunday) to sign or veto the resolution. He has said he plans to veto the measure, but it is possible he reconsiders given the resolution's bipartisan support in Congress.
To override a veto, it would take a two-thirds vote in the House and Senate of all members present and voting.
In other words, it would take about 290 votes in the House (initial resolution vote received 228 votes) and about 66 votes in the Senate (initial vote received 60 votes).
Based on these numbers, a veto override looks unlikely.
Rep. Wiley Nickel's (D-NC) Plea to Gensler
In an effort to rescind SAB 121 without forcing President Biden's hand, Rep. Wiley Nickel (D-NC) sent a letter to SEC Chair Gensler urging him to withdraw SAB 121.
The letter reiterates Rep. Nickel's policy and process concerns with SAB 121, while adding:
The "SEC is turning cryptocurrency regulation into a political football and forcing President Biden to choose sides on an issue that matters to many Americans."
Here's the full letter text.
House Passes Blockchain Bills
On Tuesday and Wednesday, the House passed several bipartisan bills under the suspension of the rules.
As background, "suspension of the rules" is a process generally used for fast-tracking non-controversial bills through the House. Bills passing under suspension are subject to limited debate and no floor amendments, but require a two-thirds majority to pass.
Here are brief summaries of the blockchain related provisions in three bipartisan bills that passed:
1.) H.R. 4814 - Consumer Safety Technology Act
Vote: Passed by voice vote.
Text.
Sponsors: Reps. Darren Soto (D-FL), Michael Burgess (R-TX), Lori Trahan (D-MA), Brett Guthrie (R-KY), Kathy Castor (D-FL).
Summary:
The bill would:
Direct the Department of Commerce and the Federal Trade Commission to study how the use of blockchain technology in commerce may limit fraud and other unfair or deceptive practices.
Direct the FTC to study and report to Congress on FTC actions and recommendations for protecting consumers from unfair or deceptive practices involving digital asset tokens.
Express numerous pro-blockchain findings, such as:
"tokens and blockchain technology are driving innovation and providing consumers with increased choice and convenience.”
2.) H.R. 6571 - Promoting Resilient Supply Chains Act of 2023
Vote: 390-19 - See Roll Call list of Yeas & Nays (Note: 18 of the Nay votes were Republicans (mostly House Freedom Caucus members).
Text.
Sponsors: Larry Bucshon (R-IN), Lisa Blunt Rochester (D-DE), Tim Walberg (R-MI), Robin Kelly (D-IL), Greg Pence (R-IN), Debbie Dingell (D-MI), Earl Carter (R-GA), Susan Wild (D-PA), August Pfluger (R-TX), Lizzie Fletcher (D-TX).
Summary:
The bill aims to improve U.S. supply chain resiliency by directing Commerce to develop a national strategy and best practices for ensuring robust supply chains, including by identifying and studying blockchain-based use cases, along with other emerging technologies.
3.) H.R. 6572 - Deploying American Blockchains Act of 2023
Vote: Passed 334-79 - See Roll Call list of Yeas & Nays (Nay votes included 35 Rs (again mostly House Freedom Caucus) and 44 Ds).
Text.
Sponsors: Larry Bucshon (R-IN), Kat Cammack (R-FL), Darren Soto (D-FL).
Summary:
The bill would direct the Secretary of Commerce to serve as the principal advisor to the President on blockchain policy, and provides a statutory mandate for the Secretary to support U.S. leadership when it comes to the deployment, use, and competitiveness of blockchain technology, applications built on blockchains, tokens, and tokenization.
What's Next?
On the one hand, strong bipartisan votes in the House are always a good sign for a bill's prospects in the Senate. On the other hand, unlike the House Energy and Commerce Committee, which considered the bills and non-financial use cases for blockchain at previous hearings, the Senate Commerce, Science, & Transportation Committee has not shown similar interest. The bills also lack companion legislation in the Senate, but perhaps the House sponsors can still persuade their Senate colleagues to move the bills given the successful bipartisan votes this week, particularly on the Consumer Safety Technology Act and Promoting Resilient Supply Chains Act.
FIT 21 On Deck
The House is expected to consider FIT 21 starting early next week.
At a high-level, the bill aims to clarify jurisdictional lines for the CFTC and SEC, granting CFTC oversight authority over digital assets that are functional and certified as decentralized ("digital commodities") and clarifying SEC authority over digital asset securities. It would also establish tailored disclosure and registration requirements for digital asset issuers and intermediaries, along with new consumer protection requirements, such as prohibitions against commingling company and customer assets.
Updates to FIT 21 text include:
New disclosure items for provisional registration (e.g., disclosing anti-money laundering policies and procedures).
Extended time period for the SEC to rebut presumption that a digital asset is decentralized from 30 days to 60 days.
Filing, annual, and termination fees to pay for the CFTC’s implementation of the Act and enforcement (e.g., $800,000 for exchange filing fees; $400,00 for digital commodity brokers & dealers filing fees.)
Title II is now Rep. Tom Emmer's and Rep. Darren Soto's Securities Clarity Act, which clarifies that the digital assets offered or sold as part of an investment contract are not themselves securities.
Imposes duty on Members of Congress, Congressional staff, and federal agency employees to refrain from insider trading on digital assets.
Study on expanding financial literacy amongst digital asset holders.
"Exclusion for ancillary activities" section is now "exclusion for decentralized finance activities."
Modified section now clarifies that engaging "directly or indirectly," in listed activities - "singly or in a combination thereof" - does not trigger registration requirements.
Examples of exempted activities include compiling network transactions, operating or participating in a liquidity pool, developing or maintaining a blockchain system, and more. (Full list in § 409.)
Here's a look at some of the amendments to be considered by Rules Committee next week:
Amdt. 4: To place a 2-year moratorium on issuing new "endogenously collateralized stablecoins," and directing Treasury to study them for two years (Rep. Foster (D-IL)).
Amdt. 6: To require a GAO study on the risks posed by centralized intermediaries that are primary located overseas (Rep. Foster (D-CO)
Amdts. 8 & 9: To require studies on crypto mining's impact on energy & the environment (Reps. Castor (D-FL), Huffman (D-CA), and Casten (D-IL)).
Amdt. 12: To protect the right to use crypto assets and self-custody (Rep. Davidson's (R-OH) Keep Your Coins Act )
Amdt. 13: This is Rep. Casten's bill to prohibit financial institutions from transacting with digital assets that have gone through a mixer for two years, while Treasury studies the illicit uses of mixers, privacy coins, and privacy-enhancing tech.
Amdt. 14 is just the study component of Amdt. 13 (Rep. Casten).
Amdt. 17: To extend the timeline for the SEC to review a digital asset's decentralized certification from 60 days to 90 days (Rep. Casten).
Amdt. 21: To require crypto mining operations to disclose details about their location and foreign ownership if located near a military base (Rep. Casten).
Amdt. 22: To establish various requirements for individuals to purchase or sell digital assets, including taking a financial literacy test and being at least 21 years old (Rep. Beatty (D-OH)).
Amdt. 28: To require the GAO and SEC to study the impact of foreign adversary affiliated digital asset platforms on U.S. crypto markets (Rep. Norman (R-SC)).
Look Ahead
Hearing
Tuesday, May 21 - 10AM - Senate Energy & Natural Resources Commerce
Hearing on opportunities, risks, and challenges in demand for electric power in the United States (Keep an eye out for digital asset mining discussion.)
Votes
FIT 21 and the CBDC Anti-Surveillance State Act are expected to be considered by Rules Committee and then the full House next week.
Quick Hits
Self-Custody
Senators Ron Wyden (D-OR) (Chairman of Senate Finance Committee) and Cynthia Lummis (R-WY) sent a letter to DOJ raising "grave concerns" with the DOJ's recent interpretation of money services business.
Specifically, the Senators want to make sure developers of non-custodial crypto asset software are not subject to criminal liability as unregistered money transmitters.
DOJ
U.S. Attorneys in S.D.N.Y. charged two brothers with conspiracy to commit wire fraud, wire fraud, and conspiracy to commit money laundering, based on allegations defendants exploited the Ethereum blockchain to fraudulently obtain $25 million.
Stablecoins
Pablo Segarra, Lawyer and Founder of Side Hustle Law, pens OpEd in Bronx Times urging policymakers to embrace blockchain as a way to help small businesses and underbanked communities.
OpEd: "Ritchie Torres is right. To help vulnerable communities, policymakers must embrace crypto."
Trivia
Last Week's A:
The last bill to override a Presidential veto was the National Defense Authorization Act of 2021.
This Week's Q:
Who was the first Member of Congress to announce she was expecting a baby while serving in Congress? (Happy belated mother's day to all the moms reading!)
Thank you for reading and enjoy your weekend.
-GSL
P.S. Looking for bespoke policy research, tracking, and analysis tailored for your project?Learn more about Cap Hill Crypto Advisory services.
