Senate Ag Committee Clashes Over Crypto Regulation Readiness

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The chairwoman of the Senate Agriculture Committee announced that a legislative proposal aimed at overseeing the crypto market is nearly ready for her fellow panel members to review. However, the senior Republican on the panel highlighted that meetings with industry leaders suggest that the legislative work might not yet be ready.

“The frank and honest feedback we have received from these discussions does not lead me to believe the necessary level of support for this proposal to be successful currently exists among stakeholders, and people are working very hard to try and rectify that,” said Sen. John Boozman (R-Ark.), the ranking Republican, during a Wednesday hearing on digital assets.

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Commodity Futures Trading Commission (CFTC) Chair Rostin Behnam also gave urgent testimony, emphasizing that Congressional inaction on digital assets regulation is harming investors and putting the U.S. at a competitive disadvantage. He expressed concern over Congress’ lack of action and urged lawmakers to fill the regulatory gap to allow regulators like the CFTC to offer basic consumer protections essential to U.S. financial markets.

The Senate Agriculture Committee, which has jurisdiction over the CFTC, has been working on crypto legislation aimed at granting regulatory authority over spot trading in digital commodities, such as bitcoin and Ethereum’s ether. Although details of the current effort led by Chairwoman Debbie Stabenow haven’t officially emerged, she indicated she hopes to share specific legislative language with fellow panel members by the end of the week. “We cannot afford to wait any longer to regulate these assets,” she emphasized. “The time to act is now.”

Boozman described the hearing as “a good start,” but indicated that the legislative process is far from complete. In contrast, the U.S. House of Representatives has advanced more significantly on the issue, passing a bipartisan bill addressing market structure. However, the Senate has encountered more hurdles, with members like Sens. Elizabeth Warren (D-Mass.) and Sherrod Brown (D-Ohio) voicing concerns about the risks crypto poses to consumers. Brown’s Senate Banking Committee has yet to move forward on legislation despite ongoing discussions.

“Some in this town are less interested in protecting consumers and investors than others,” Brown remarked during Wednesday’s hearing.

With limited time remaining in the current Congressional session and the approaching November elections further diverting lawmakers’ attention, addressing complex regulatory legislation remains a challenge. Behnam warned that inaction will not deter public interest in digital assets but will instead increase risks to financial markets and investors.

He emphasized the need for legislation to delineate the responsibilities of the CFTC and the Securities and Exchange Commission (SEC) in identifying digital commodities versus securities. However, Boozman cautioned that the committee should not extend its reach beyond CFTC jurisdiction into areas managed by other regulators like the SEC, Treasury Department, and Federal Reserve.

Behnam also critiqued the current reactive nature of the CFTC’s enforcement powers, suggesting that comprehensive legislation could prevent fraud and reduce regulation by enforcement. Christopher LaVigne, a partner at Withers law firm, echoed this sentiment, noting that enforcement alone does not provide the same deterrent effect as comprehensive regulation.

Behnam’s testimony reflects a growing urgency to establish clear federal rules for the crypto industry, aiming to protect investors and stabilize financial markets, but legislative consensus remains elusive.