Just one week before “Black Monday”, when the crypto market saw its total market capitalization release over $100 billion in one day, Senators Kirsten Gillibrand (D-NY) and Cynthia Lummis (R-WY) unveiled their bipartisan cryptocurrency bill. the Responsible Financial Innovation Lawco-authored by junior senator from New York and junior senator and Bitcoin HODLer of Wyoming, has been highly anticipated by crypto industry groups, who have been lobbying Washington relentlessly for months to get a favorable bill on the table.
In the eyes of many, the timing could have been better. The broader cryptocurrency sector has now suffered more than $2 trillion in losses since its November 2021 peak. That’s separate from the growing cases of outright theft, which the Federal Trade Commission recently tabulated as being responsible for $329 million in retail crypto investor losses in the first quarter of this year. The announcement of the bill was soon followed by the revelation that Celsius cryptocurrency lender was suspending transactions, withdrawals and transfers amid market volatility, while Binance, the world’s largest cryptocurrency exchange, halted withdrawals as the cryptocurrency bull run accelerated.
The Lummis-Gillibrand bill presents a broad framework to regulate cryptocurrencies, but it does so with a light-hearted approach that industry groups had. largely cheering its construction and anticipating its premiere. Previous versions of a bill introduced by Lummis alone seemed poised to give the industry even its wildest wishes; the bipartisan version, due in part to Gillibrand’s input, seems more restrained.
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But it’s the industry’s courtship of Gillibrand that has been particularly notable. Facing substantial regulatory scrutiny from progressives in New York, including a bill that just passed the state legislature enact a partial moratorium in cryptocurrency mining, crypto lobbyists have eyed Gillibrand as a potential ally. By Bloomberg, “Industry executives sought to woo Gillibrand during a recent trip to San Francisco as she commuted between a meeting with them at the St. Regis Hotel and a breakfast with venture capitalists.” Just a few weeks later, digital asset lobbyist and Blockchain Association CEO Kristin Smith held a fundraiser in Manhattan on behalf of Gillibrand.
Gillibrand spokesman Evan Lukaske insisted that “the turmoil in the cryptocurrency market demonstrates why this bill is necessary,” because it adds some measure of regulation to an industry without consumer protection or accountability. But financial reform groups have been alarmed by the details of the bill, which they do not see as progress.
“There are a lot of things I don’t like about the bill,” said Mark Hays, senior policy analyst for fintech at Americans for Financial Reform. “We see it very much as a bill that functions as a kind of industry wish list that creates a regulatory regime that is light, rather than reining in the risky exploitation practices that are prevalent in the space, and lends legitimacy. to many of these practices. .”
It is unlikely that a bill such as this would have been drafted without the sustained and costly political efforts of the industry. Gillibrand joined Lummis at a Politico Live event sponsored by crypto asset manager Grayscale in March to announce its participation in the bill; at the end of May, the two showed up at an event organized by the Digital Chamber of Commerce, a crypto lobby group. After the presentation of the bill, the two joined for a Washington Post live event, again sponsored by Grayscale, which also featured CFTC Chairman Rostin Behnam. (Like the block reportedLummis also booked appearances at Bitcoin Miami and the Heritage Foundation alongside Ted Cruz, to underscore Republican support for the sector.)
It is unlikely that a bill such as this would have been drafted without the sustained and costly political efforts of the industry.
“There’s no indication that he represents the median or even a large part of the Democratic Party on the issue, it’s Gillibrand doing it on his own,” said Rohan Grey, an assistant professor of law at Willamette University. Cryptocurrency-focused media such as The block they have reported that the bill is unlikely to pass, and is more of a package of messages than finalized legislation. But even that carries certain risks. “The chance that the language of this bill will become the default language is now much higher. It’s dangerous to even take this as a starting point,” Gray said.
Lukaske, a spokesman for Gillibrand, said the bill “is not a ‘Republican bill.’ It is a bipartisan bill with a Democratic senator and a Republican senator.”
Gillibrand’s embrace of cryptocurrency comes at a particularly surprising time, given the current political climate. Gillibrand has long expressed her position as the most outspoken feminist senator; her 2020 presidential run sported a “fiercely feminist message” according to The New York Times, and introduced policies attacking the gender pay gap, fighting abortion bans and more. But in the last days before Roe vs. Wade Gillibrand has trained his political capital to polish what many have denounced as a financial deregulation bill and court political support from the industry.
That’s especially surprising given the culture around cryptocurrencies, which has long been dogged by accusations of misogyny coming from a very male fan base. Having two patrons certainly doesn’t hurt with crypto’s gender-based optics issues. “There is this culture of toxic brothers with crypto,” Gray said. “Watch how the crypto brothers constantly harass Elizabeth Warren on Twitter.”
“Sen. Gillibrand has spent his career fighting for reproductive rights,” Lukaske said, “and the idea that working across the aisle on a financial regulation bill could somehow invalidate his entire career is not a serious position”.
Among the bill’s most important provisions is the assignment of “regulatory authority over digital asset spot markets to the Commodity Futures Trading Commission,” a chronically weak and underfunded regulatory authority compared to the Stronger Securities and Exchange Commission. Crypto groups aggressively lobbied for this change, described as a “fundamental and comprehensive beginning,” by Perianne Boring, executive director of the Digital Chamber of Commerce.
While the SEC has significant disclosure rules and an investor protection standard, the CFTC has no such mandate. Critically, Hays added, “they don’t have the money, capacity or technical expertise to deal with the depth and breadth of crypto markets… which is what the industry has been looking for for a long time.”
There are other concerns as well. The bill’s provision directing the Government Accountability Office (GAO) to “conduct an analysis of the opportunities and potential risks associated with investing retirement savings in digital assets” has alarmed to many critics, by providing a way to view retirement accounts open to volatile, uncertain crypto investments. And while tapping into the $11 trillion currently sitting in employer-based retirement accounts would do well to drive up prices for digital assets held by the likes of Senator Lummis, anyone with cryptocurrency in their 401(k) would have had a rude awakening on Monday after those markets continued their months-long slide with another precipitous drop.
Lukaske questioned that the bill would “open the door for people to invest their 401(k) in cryptocurrency.” He said the GAO analysis would simply report the risks involved.
When Fidelity Investments announced that it would allow Bitcoin in 401(k) accounts, Biden’s Department of Labor stated that he opposed to the movement strongly. “We have serious concerns with what Fidelity has done,” said Ali Khawar, acting deputy secretary of the Employee Benefits Security Administration. The Wall Street Journal at the end of April. Few progressives have joined the chorus of applause coming from the crypto industry over these developments.
“The DOL urged fiduciaries to be careful before adding a cryptocurrency option to 401(k) investment menus,” Lukaske said. “Our bill, which pauses to study this issue, appears to be in tune with, rather than at odds with, the DOL’s position.”
That said, the bill appears to fall far short of a number of Democratic priorities, both from the Build Back Better Act, which sought to relatively aggressively tax and regulate cryptocurrency to pay for various social services, and from the regulatory priorities of the Democrats. more broadly.
Meanwhile, Gillibrand is certainly aware of the spoils of an industry alliance. Back in May, crypto industry executives put $20 million in congressional campaign spending so far. Meanwhile, the industry has spent more than $100 million on lobbying since 2018. And she’s not the only New York Democrat to sneak up on the industry, though most progressives have stayed away: Congressman Ritchie towers was praising crypto for “financial inclusion” reasons in March.
Gillibrand, who has said he does not own any cryptocurrency and does not accept contributions from corporate PACs or federal lobbyists, may be a true believer in the technology. But the timing of the political calculation, given the dire condition of the feminist issues she long championed in Washington, couldn’t look worse.
Not too long ago, aggressive cryptocurrency taxation seemed like the way to pay for things like family leave. Now, with abortion bans widely publicized, one of the most vocal advocates of family leave has introduced a bill that even exempts crypto transactions under $200 from capital gains tax, siding with the industry on several fronts.