Proof of State is the Wednesday edition of Fortune Crypto where Leo Schwartz delivers insider insights on policy and regulation.
Sometimes this newsletter feels like a broken record, but I’ve come to realize that’s just the nature of Washington. Legislation is not only slow, but it’s often a Sisyphean effort, with legislators and their unheralded staffers pouring untold hours into hearings, meetings with lobbyists, and research sessions to produce thousands of pages of meticulously written bills that will inevitably be scrapped because some political butterfly flapped its wings.
I recently finished Act of Congress, a phenomenal book by Washington Post reporter Robert Kaiser on the passage of Dodd-Frank, a monumental piece of legislation that seems impossible to imagine in today’s environment. Even in the period following the worst financial crisis since the Great Depression, Dodd-Frank barely made it out of the Senate, despite nearly every politician agreeing that reform was needed (some in worse faith than others). So how are we going to get crypto legislation?
Senators Cynthia Lummis (R-Wyo.) and Kirsten Gillibrand (D-N.Y.) released the long-awaited new draft of their crypto bill this morning, as I reported Friday. The legislation is ambitious—they would argue more so than efforts from the House Financial Services and Agriculture committees—because it tackles nearly every critical issue, from market structure to stablecoins, in one gargantuan, 100-plus-page act. It’s also bipartisan, unlike the House bills.
Many elements will make the crypto crowd happy, including a generous definition of a digital asset commodity that would put more oversight in the hands of the Commodity Futures Trading Commission, as opposed to the Securities and Exchange Commission, tax leniency for transactions under $200, clear oversight for payment stablecoin issuers (although no Fed access, as Circle has called for), and funding for the CFTC, along with other agencies, to implement the policies.
There are also attempts to win over crypto skeptics such as Sen. Elizabeth Warren (D-Mass.), who tend to focus on crypto’s key use case as a tool for criminals, with a new section on preventing illicit finance—three of the provisions in the Lummis-Gillibrand revamp were originally proposed by Warren and Sen. Roger Marshall (R-Kans.) in their controversial anti-money-laundering–focused bill from last year.
So what is the legislation missing? Just a clear path forward. A Senate staffer familiar with the bill told me that they view “multiple paths forward” for passage, although demurred when asked what they may be or what a timeline might look like. Because the bill would touch multiple committees—including the Senate Banking Committee, which is notoriously loath to pass new legislation—it is highly unlikely it would be considered in its complete, current form.
Ron Hammond, a D.C. whisperer from the Blockchain Association, told me last week it’s more likely that some chunks of it will be added on to other, must-pass legislative efforts, like spending bills or the farm bill, which is consuming the Senate Agriculture Committee’s time this year. More important, what this bill accomplishes is inserting the Senate—and especially Lummis and Gillibrand, two key crypto advocates—back into the legislative conversation that has been dominated by the House so far this year. Whether that changes anything remains to be seen.
Leo Schwartz
leo.schwartz@fortune.com
@leomschwartz
