Chairman of New Crypto House Panel to Focus on Legal Clarity for Digital Assets

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Rep. French Hill, R-Ark., Plans to Be Aggressive in Regulating Digital Assets This Year

CQ-Roll Call, Inc via Getty ImagesWhat Happened

As the new 118th Congress finalizes committee membership, the Republican-led House of Representatives is already showing signs of a new approach to how cryptocurrencies will be regulated in the United States. One of the first actions in January under the House Financial Services Committee by newly appointed chairman, Congressman Patrick McHenry (RN.C.), was the creation of a new subcommittee dedicated to asset policy digital.

The new chair of the digital assets, fintech and inclusion subcommittee is Rep. French Hill (R-Ark.), who shared with me his goals for the digital asset industry. He stressed establishing clear rules and said he planned to focus on payments.

Broader Context

The 117th Congress held 15 hearings focused on digital assets in 2022. Key digital asset legislation was proposed in the Senate last year, with the Lummis-Gillibrand Responsible Financial Innovation Act (RFIA) billed as the first comprehensive bipartisan bill ever considered by Congress. The Senate Agriculture Directorate quickly responded by introducing its own bill, called the Digital Commodities Consumer Protection Act (DCCPA). While the RFIA will likely take longer to be considered for adoption, the DCCPA is more likely to be adopted, which would designate the Commodities Futures Trading Commission as the primary regulator of digital assets. The House, under Democratic control last year, saw no bill on large-scale digital assets last year, but McHenry negotiated a potential stablecoin bill with his counterparts in the other side of the aisle.

key quote

Thanks to the leadership of Chairman Patrick McHenry, the House Financial Services Committee has been preparing for its work on digital assets for years. On the legal side, Congress should establish clear rules of conduct so that companies know what they need to do to operate and innovate effectively and legally in the United States. As Chair of the new Subcommittee on Digital Assets, Fintech and Inclusion, I will lead the subcommittee in creating a regulatory and legal framework for digital assets, including digital payments, that protects consumers and investors, while keeping America a leader in FinTech and blockchain innovation.

Rep. French Hill (R-Ark.), chair of the subcommittee on digital assets, fintech and inclusion. key fact

The mandate of the new Congressional Subcommittee on Digital Assets, Fintech and Inclusion includes:

Provide clear rules among federal regulators for digital assets Develop policies that promote fintech reaching underserved communities Identify best practices and policies to strengthen diversity and inclusion in the digital asset industry

Republicans have announced their full slate of members who will serve on the new subcommittee. Democrats are expected to announce their assignments to that subcommittee shortly.

Prospects and implications

Hills has focused in recent years on a US central bank (CBDC) digital currency. In October 2022, Hill co-signed a letter with McHenry to the (DOJ) regarding the findings of an assessment conducted to assess the need for legislation to issue a US CBDC. The letter told the administration that it was Congress that had the power to mint currency and that it should consider legislative matters. During a recent FTX hearing, Hill compared the actions of former FTX CEO Sam Bankman-Fried to those of Bernie Madoff as a massive fraud perpetrated by individuals who should not be used as an act of accusation against the entire crypto industry or its underlying technology.

Pushback for Hill may come from Reps. Stephen Lynch (D-Mass.) and Jesus G. Chuy Garcia (R-Mich.), who recently published an opinion piece endorsing the SEC as a regulator of digital assets and also painted a bleak picture of the crypto industry, describing it as unwilling to comply with laws and regulations. While Sen. Elizabeth Warren (D-Mass.) recently said the SEC needs to step up its enforcement efforts, Sherrod Brown (D-Ohio), as chairman of the Senate Banking Committee, notably amended his policy approach in a public letter from that of relying on the SEC to manage digital assets to one that involves new legislation from Congress. If Brown eventually agrees to legislation that would finalize the role of the SEC and the Commodities Future Trading Commission (CFTC) in digital assets with Debbie Stabenow (D-Mich.), Chair of the Senate Agriculture Committee and co-sponsor of the DCCPA , the rest of the Senate would likely react positively to such a unified approach.

Main decision points

The industry should consider the possibility of legal and regulatory clarity on the horizon for digital assets, with serious discussion of major legislation in this Congress. As companies consider that the growth and development of any industry depends on reducing regulatory risks, this could be a boon for digital assets in 2023 and 2024.

Individuals should consider how the chairs of the House Financial Services Committee and the Senate Banking Committee are flagging cryptocurrency regulation as a policy priority. Additionally, the House financial services panel will likely ask SEC Chairman Gary Gensler to spend more time in Congress explaining his approach to digital assets, which could slow enforcement efforts by agencies.

The optics of what Congress is supposed to or should do as a result of FTX is another important question, as there may be pressure from voters to do something about the digital asset industry. This could provide the catalyst needed to advance a major digital asset bill through Congress in 2023.

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