Republicans Ramping Up Pressure on Biden’s Crypto Regulation: ‘Driving Innovators Out of America’

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Galaxy CEO Mike Novogratz provides insight into cryptocurrency regulation on “Making Money”.

Republicans on the House Financial Services Committee are mounting pressure on the Biden administration’s oversight of digital assets, this time targeting the White House Council of Economic Advisers, a key advisory body within the Biden executive office. president, FOX Business learned .

Rep. Warren Davidson (R-Ohio), chair of the housing and insurance subcommittee, and Rep. Mike Flood (R-Neb.), who sits on the digital assets subcommittee, wrote a letter at CEA, demanding to know why the board is taking what it describes as a “hostile” approach to the digital asset industry.

The council has no direct authority over digital asset regulation, but does have President Biden’s ear on many economic issues, including the administration’s stance on regulating the crypto industry. a trillion dollars.

Congressional Republicans have increasingly criticized the Biden administration’s stance on crypto, particularly the current Securities and Exchange Commission crackdown. GOP House executives say the SEC’s recent regulatory approach, including investigating exchanges and declaring digital coins as unregistered securities (and therefore in violation of the law), results in both the cryptographic innovation and the transfer of capital abroad.

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Crypto proponents believe that digital coins are a future source of value and that the underlying technology known as blockchain has the potential to rival the internet by providing a transparent way of doing business.

US President Joe Biden, center right, takes photos with members of Congress after speaking during a State of the Union address at the US Capitol in Washington, DC, US, on Tuesday, February 7, 2023. Biden speaks against the backdrop of renewed (Nathan Howard/Bloomberg via Getty Images/Getty Images)

But White House officials and SEC Chairman Gary Gensler say they are simply trying to protect investors from a historically underregulated and fraud-ridden industry. They point to various industry failings, including the recent implosion of crypto exchange FTX and the criminal indictment of former industry prodigy Sam Bankman-Fried.

“Today, many entrepreneurs, given the establishment of executives in foreign markets, are actively evaluating their exit from the U.S. market,” the letter said. “Ultimately, if our approach does not change, this posture will continue to drive entrepreneurs to locate their businesses outside the United States, attracting capital and economic growth away from the United States to other countries. ”

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Davidson and Flood specifically cite the president’s latest economic report, an annual report released by the CEA in March, pointing out that the language relating to digital assets differs markedly from previous years, where the council had previously advocated for Congress to play a central role. in the regulation of crypto assets.

The White House wants SEC-led crypto regulation from Gensler, who has filed a slew of enforcement actions against the crypto industry. Gensler said most digital assets, with the exception of Bitcoin, are securities and should be regulated by the SEC.

He was quoted as saying that most crypto tokens are just gambling chips in a casino. The CEA report expressed concerns along these lines, stating that digital assets “continue to pose risks to financial markets, investors and consumers.” Just a year prior, in March 2022, Biden’s executive order on ensuring responsible development of digital assets set a largely positive tone about the merits of the industry, the need to regulate it, and its potential. overall.

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The letter also requests answers to five questions, including how the CEA thinks the industry should navigate regulatory uncertainty and how digital assets should be regulated. He also asks the board why he thinks the FedNow instant payment system and a central bank digital currency (CBDC) could provide a more inclusive financial system than blockchain technology, as he said in his March economic report. . CBDCs are a digital version of the dollar, while FedNow mimics the efficiency of blockchain.

In this photo illustration a United States Federal Reserve logo seen displayed on a smartphone with stock market percentages in the background. (Photo Illustration by Omar Marques/SOPA Images/LightRocket via Getty Images/Getty Images)

But crypto advocates say both are anathema because they defeat the purpose of an industry that was designed to exist outside of government control. CBDCs have raised concerns due in part to the potential for increased government surveillance through financial data and spending trends. Others say the creation of CBDCs and FedNow is part of an attempt to destroy crypto as a viable, independent business.

FedNow, a payment infrastructure that integrates instant settlements for financial institutions will go live in July. CBDCs, according to Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen, are likely still several years away.

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“Congress plays a critical role in the regulatory framework for digital assets, which is not at the discretion of unelected bureaucrats who hold inconsistent views,” Rep. Davidson told FOX Business.

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