That comes as House Republicans plan to hold a hearing on Tuesday — featuring Coinbase’s top lawyer — to strengthen proposed legislation reforming crypto rules that would rein in the SEC and shift greater responsibility to the Commodity Futures Trading Commission.
“It’s an interesting coincidence,” Rep. French hill (R-Ark.), Binance, one of the authors of the new legislation, said in an interview after the lawsuit was filed.
The dueling moves by the crypto industry’s biggest Washington foe and its most powerful allies underscore the government’s sharp divisions over how to regulate the market for digital tokens. The big question in the crypto world is how well Biden-era regulators can be defended through the courts until the political winds shift more favorably.
“We don’t need more digital currency,” Gensler said on CNBC on Tuesday, just before House Republicans began hearings to showcase their crypto plan. “We already have digital currency. Its name is US dollar. It’s called the Euro. It is called a yen.
After FTX’s collapse last year, crypto critics Gensler exposed alleged fraud and mismanagement, doubling down on the idea that digital asset startups have been around for too long and should be forced to comply with existing financial regulations.
“We shouldn’t assume that crypto has some innovation payout,” said Mark Hayes, a senior policy analyst at Americans for Financial Reforms, which advocates for tougher digital asset regulation.
Crypto boosters and other allies — led by congressional Republicans, and including several Hill Democrats — are working to establish a new regulatory regime more accommodating to digital currencies.
The new House GOP bill — drafted by leaders of the Financial Services and Agriculture committees — would not eliminate the SEC’s role in the market, but would impose stronger protections on the agency to give crypto startups a clear path to government regulation. In doing so, the bill would give the CFTC a new say over a large portion of the industry. It’s an ideal legal arrangement for crypto that companies like Coinbase have long sought.
“Certainly, the chairman has been on an enforcement spree, I would say, since the beginning of this year, which strikes me as covering up the lack of any successful intervention in FTX in 2022,” Hill said. Senior Member, Financial Services Committee. He goes after Kim Kardashian about promoting crypto, but does nothing about actually working with companies to ensure compliance.
Binance and Coinbase will no doubt fight Gensler to protect their businesses, but he has the upper hand in the existential battle. Even if Republicans can attract bipartisan support, it could take years for Congress to agree on a major regulatory overhaul that would make life easier for crypto.
Courts are increasingly likely to dictate the direction of US crypto policy in the near future as companies fight SEC enforcement actions.
“This is the reason we’re here,” CFTC Chair Rostin Behnam, who supports the broad strokes of the GOP proposal but wants to see some changes, said Tuesday when asked about the SEC cases. “Confused.”
A number of prominent Democrats have already signaled that they will rally around Gensler and his agency, meaning that the long-term success of crypto to prove its legitimacy — contained in the House Republican bill — is unlikely.
“It’s designed to make sure the SEC can’t police this market,” Rep. Brad Sherman of California, said a senior member of the Financial Services Committee. “What (crypto executives) want is fake regulation. They want control.
Sam Sutton contributed to this report.