Two members of the Congressional Blockchain Caucus have gone on a writing spree—firing off letters to the Securities and Exchange Commission and to Treasury Secretary Steven Mnuchin.
Rep. Tom Emmer (R-MN) penned the missive to the SEC, urging the regulator to provide the clarity needed for banks to provide custody services for digital securities. Several banks across Europe—including Standard Chartered in the U.K.—have recently unveiled plans to launch such platforms, prompting fears that the U.S. could end up being left behind.
Although the Office of the Comptroller of the Currency issued a letter in July stating that banks can keep cryptographic assets in custody, Emmer warned that the SEC’s failure to provide guidance “leaves the industry without the infrastructure to operate in a regulated way”—and means the regulator FINRA is unable to approve broker-dealer applications.
Warning the impasse “threatens to stymie the progress of the digital security industry,” the congressman added:
“The adoption of innovative technologies, including the issuance of securities via distributed ledgers, would improve the functioning of securities markets by making them more efficient, accessible, and transparent, which should be welcomed and encouraged.”
Emmer also claimed that the absence of guidance has meant FINRA has allowed applications to languish, meaning businesses in the space are unable to appeal. In some cases, applicants have even been asked to withdraw their requests altogether.
Eight members of Congress joined Emmer in signing the letter, which was addressed to outgoing SEC chairman Jay Clayton. Several commissioners, including the crypto-friendly Hester Peirce, were CCed on the message.
Taking on Mnuchin
Meanwhile, Rep. Warren Davidson (R-OH) said he had sent a letter to Mnuchin “strongly encouraging him to consult with Congress before issuing new regulations that govern the use of digital self-hosted wallets.”
These wallets enable crypto enthusiasts to complete peer-to-peer transactions using cryptocurrencies without relying on a bank or third party.
Davidson’s letter followed a Nov. 25 tweet from Coinbase CEO Brian Armstrong that said: “Last week we heard rumors that the U.S. Treasury and Secretary Mnuchin were planning to rush out some new regulation regarding self-hosted crypto wallets before the end of his term. I’m concerned that this would have unintended side effects.”
The congressman echoed these remarks, warning that such regulations would “hinder American leadership and preclude meaningful participation in the technological innovation currently underway throughout the global financial system.”
After the letter was sent, Davidson warned that rushed-through regulations “will violate the financial privacy of users and send a message to the world that you shouldn’t build businesses or try new cases for blockchain in the United States.” He added:
“Over-regulating self-hosted wallets will crush a nascent industry and leave the United States behind the rest of the world when it comes to harnessing the power of blockchain and cryptocurrency.”
Growing concerns
As reported by Modern Consensus last week, Ripple CEO Brad Garlinghouse has doubled down on his warning that the U.S. is “out of step” when it comes to regulatory clarity—with countries around the world offering more sophisticated guidelines for crypto entities. As a result, he fears China is gaining an upper hand in the race to roll out technology. Earlier this year, Ripple executives warned they were prepared to move their headquarters out of America in order to relocate to more crypto-friendly countries such as the U.K., Switzerland, Singapore, or Japan.
Then on Dec. 2, four Democratic members of Congress led by Rep. Rashida Tlaib (D-MI) introduced the STABLE Act, which would force stablecoin issuers to obtain federal bank charters and follow many banking regulations. Jeremy Allaire, CEO of USD Coin-issuer Circle, warned it “would represent a huge step backwards for digital currency innovation in the United States, limiting the accelerating progress of both the blockchain and fintech industry.”
Brian Brooks, a former Coinbase executive who is now acting Comptroller of the Currency, was recently asked about Armstrong’s tweet on CNBC.
He vowed that the U.S. was not planning to kill off Bitcoin, and stressed that regulators in Washington were determined to get things right.
Brooks also attempted to inject some optimism into the discussion—hinting that the crypto industry could expect “good news” from the Trump administration as the final weeks of his presidential term draw to a close. These upbeat developments would mainly focus on clarity about the regulatory standing of digital assets—something both Emmer and Davidson have been calling for. He said:
“It’s a dangerous world out there, we have to be honest about that. But nobody’s gonna ban Bitcoin.”
Several members of Congress have expressed exasperation at how politicians and regulators have reacted to cryptocurrencies and blockchain, with critics fearful that they could breed financial stability and undermine the sovereignty of the U.S. dollar. The regulatory pushback that Facebook-founded stablecoin Libra—now Diem—suffered appeared to take the social media giant by surprise. That said, the attitude of central bankers and finance ministers in Europe hasn’t been much better.
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