The struggle to change the way the crypto industry is regulated may finally see progress as the House Financial Services Committee plans to consider two crypto bills. One bill aims to regulate trading platforms like Coinbase, while the other seeks to establish regulations for stablecoins, a type of digital token tied to the value of the US dollar.
Committee chairman Rep. Patrick McHenry has prioritized crypto, but Democrats are skeptical of the proposed bills and question the need for legislation. Securities and Exchange Commission (SEC) Chair Gary Gensler believes that existing laws can effectively regulate crypto firms. However, a recent court case between the SEC and Ripple Labs has complicated matters.
In this case, the SEC claimed that XRP tokens were securities and that Ripple failed to register properly. Ripple, on the other hand, argued against this classification. The judge ruled that XRP was not inherently a security and suggested that most secondary market transactions involving tokens do not fall under securities laws.
This ruling could make it challenging for the SEC to take enforcement actions against other token issuers and platforms such as Coinbase. In fact, after the Ripple decision, Coinbase’s shares saw a significant surge of about 20%. Over the past month, the stock has risen by over 83% to $104.59.
Crypto Firms and Republicans Push for Legislation in Wake of Ripple Win
Crypto firms and Republicans are seizing the recent Ripple victory as an opportunity to persuade Democrats to pass legislation regarding cryptocurrency regulation. The argument put forth is that without a bill, consumers will lack an agency to protect them from potential abuse within the industry, with the assumption being that if the courts limit the jurisdiction of the U.S. Securities and Exchange Commission (SEC).
Ron Hammond, the director of government relations at the Blockchain Association trade group, acknowledged the Ripple case’s profound impact on the political landscape surrounding these bills, as he tweeted on Tuesday.
Coinbase CEO Brian Armstrong is scheduled to meet with lawmakers on Wednesday to present the trading platform’s stance and advocate for legislation that would grant regulatory clarity, subsequently fostering growth within the U.S. crypto industry, according to an individual familiar with the matter.
Despite Republican and crypto firms’ efforts, the two bills face significant obstacles. While they are likely to pass through Republican-controlled House committees without much resistance, securing enough support among Democrats to pass the Senate remains a considerable challenge.
Additionally, several left-leaning advocacy groups have criticized one of the bills focused on trading platforms. In a joint letter sent to House committees last week, organizations such as Americans for Financial Reform and the Center for American Progress expressed concerns that this bill would undermine consumer and investor protections for both traditional and crypto investors. The letter also noted that it would have broader implications for financial regulatory agencies by weakening oversight of various financial products and services.
Ultimately, it seems that achieving a favorable outcome in court is currently more feasible for crypto firms than achieving a legislative victory in Congress.