Proof of State is the Wednesday edition of Fortune Crypto where Leo Schwartz delivers insider insights on policy and regulation.
Last November may have been a low point for the crypto industry, but it was a high watermark for interest in D.C. The (30-year-old) boy wonder Sam Bankman-Fried had spent months roaming the halls of the Capitol, buying access and nearly a crypto bill.
In the wake of FTX's collapse, it was quickly apparent that his preferred legislation, the Senate Agriculture Committee's Digital Commodities Consumer Protection Act, was no longer feasible. Despite the potential for lawmaking drying up, Congress still wanted to separate itself from the stench of his influence, with key committees holding public hearings to figure out what had gone so wrong. As regulatory agencies like the SEC and CFTC stepped up enforcement actions, even oversight hearings gravitated around crypto.
We're nearly a year removed from the scandal, and Congress has moved on. That reality was laid bare at a hearing yesterday at the Senate Banking Committee with SEC Chair Gary Gensler, the favorite punching bag of the crypto industry and Republican party. If this had been six months ago, crypto would have dominated the discussion. SEC critics like Sen. Bill Hagerty (R-Tenn.) would have ripped into the agency's "regulation by enforcement" approach, and backers like Chair Sherrod Brown (D-Ohio) would have championed Gensler's steady hand.
To be fair, both parties expressed these sentiments, with Hagerty asking about the status of spot Bitcoin ETFs, and Brown lauding Gensler's efforts to "crack down on abuse and enforce the law." Even so, they felt like afterthoughts. Hagerty rushed to ask his ETF question before time ran out, and the vast majority of senators on the committee didn't even mention digital assets. Presidential candidate and ranking member Tim Scott (R-S.C.) sheepishly implored his colleagues to ask about crypto after his five minutes were up.
It may come as a shock, but the SEC and Gensler have other subjects in their remit (with his handling of areas like ESG and private funds just as controversial as crypto), and most senators pursued other lines of questions, from private equity to the speed of rulemaking. AI seemed to be the shiny object to take crypto's place, with committee members asking about deepfakes and financial stability.
A central factor for passing legislation is a committee chair willing to spend political capital on the effort. House Financial Services Chair Patrick McHenry (R-N.C.), along with House Agriculture Chair Glenn Thompson (R-Pa.), have made it clear that crypto is a top priority. That sentiment is not shared in the Senate, nor in the White House, which appeared to block any bipartisan deal on stablecoin legislation in July. It's not just that Brown is skeptical of the need for crypto regulation—it's just no longer an area of focus for his committee.
The one possible exception would be a bill or amendment focused on national security and anti-money laundering—a cause championed by a number of senators on the committee, including Elizabeth Warren (D-Mass.) and Mike Rounds (R-S.D.). But even they declined to ask Gensler any crypto-related questions during the hearing.
The only senator to lead off with a blockchain-related question? Cynthia Lummis, the Bitcoiner from Wyoming. If only every lawmaker changed their profile picture to laser eyes.
Leo Schwartz
leo.schwartz@fortune.com
@leomschwartz
