Following the $60 billion collapse of the Terra Luna stablecoin that led to a $2 trillion downsizing of the crypto marketplace just a few months ago, the cryptocurrency industry that appears unable to self-regulate could be victim to fast-moving legislation negotiated behind closed doors by top-ranked elected Members of Congress and Treasury officials. I confirmed with a person familiar with the negotiations who had seen variations of the language in the bill confirmed they were close to final but still requires buy-in from the Treasury and also the White House for the deal to be considered final.
According to my source, participating in the negotiations were Financial Services Committee Chair Maxine Waters (D-CA), Ranking Member Patrick McHenry (R-NC), and a high-ranking Treasury official who reports directly to Secretary Yellen looking to seal a deal for a bipartisan bill focused on stablecoin regulations that could pass Congress and get to Biden’s desk to become law. This means that there could be a bill as early as next week that is essentially coming from the President’s desk if the White House buys into the compromise, making this legislation vastly different than other bills the cryptocurrency industry has seen before.
Representative Patrick McHenry, a Republican of North Carolina and ranking member of the House … [+]
So what does all of this mean? It means that crypto lobbyists could be sticking it out in Washington D.C. over the weekend while their colleagues head to the beach, because there may be an extremely short window of time where any meaningful changes can be worked on by Members of the Financial Services Committee leading up to a markup hearing as soon as this coming Wednesday.
For readers that are not familiar with the idea of a ‘markup’, it is typically the very last phase of how a bill makes it way through a Committee before the legislation is sent to the House floor for a vote to try to pass the legislation. While many in the crypto industry have been used to lots of hearings in Congress and discussions on the possibilities of different kinds of legislation, the vast majority of bills do not make it into law. For a bill that not many have seen yet, a few days is not a long time on Capitol Hill for stakeholders to provide suggested amendments or feedback before the markup.
The real question is why would the U.S. Treasury be so focused now on seeing a major bill regulating stablecoins becoming law, particularly one that seems to diverge from their recommendations in the President’s Working Group ‘Report and Recommendations on Stablecoins’. Under Secretary of the Treasury for Domestic Finance Nellie Liang stated this past Monday in a speech that there could be flexibility in one of her original suggestions in the report that only banks issue stablecoins.
WASHINGTON, DC – FEBRUARY 15: U.S. Treasury Undersecretary For Domestic Finance Nellie Liang … [+]
The question as to why this is all happening now could be either a genuine interest for lawmakers to ‘tame the Wild West’ of crypto because the industry could not do it themselves. Alternatively, there is perhaps a new concern from U.S. Government officials that the crypto industry may disappear after the $60 billion stablecoin collapse resulted in a 66% shrinking of the total market cap for crypto overall. However, as Friday night has passed and no reports on the final results of the negotiations have reported on, the public may have to wait possibly until Wednesday when the bill enters markup to learn of the final language and proposed policy of major stablecoin regulation that has wide-reaching implications for the crypto industry.
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