2022: The Year of Crypto Policy
HODLpac updates, the last few weeks in crypto policy, and what to expect in 2022.
Your favorite newsletter on crypto policy and politics, from your favorite community-governed PAC is back.
2022 is off to a hot start and it’s shaping up to be a busy year. Keep reading for the lay of the land in all things crypto policy.
But, first, some quick organizational updates on HODLpac:
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Catching Up on Crypto Policy News
2022 is shaping up to be the most active year in crypto-related public policy in history. Don’t believe it? Keep reading to see how much there is to cover just since our last newsletter. Here are a few of the main storylines in the world of crypto policy.
America COMPETES Act Close Call
A draft of the America COMPETES Act was introduced on January 25th by Rep. Jim Himes (D-CT-4) - a member of the House Financial Services and Intelligence Committees - aiming to help the US compete economically with China.
The draft bill included language that would “give the Treasury sweeping powers to freeze or block transactions and accounts interacting with foreign entities by expanding its existing authorities under 31 U.S. Code § 5318A, which lists special measures that Treasury is allowed to take to prevent money laundering.” (Source: Kollen Post, The Block). These powers would apply not only to crypto but all financial transactions.
The Good News: After lobbying from the crypto industry, Rep. Himes has prepared an amendment to this language. Given that Himes is the lead sponsor of the bill, there is a good chance this new language will be adopted.
Jerry Brito @jerrybritoI'm happy to report @jahimes has listened to our voices and looks like the notice and comment protections in the COMPETES Act related to special measures will be retained! This is in a "manager's amendment" that will be considered later this week. https://t.co/6mAtLD0tF9
Energy & Commerce Hearing on Bitcoin Mining
On January 20th, the House Committee on Energy & Commerce held a hearing on Bitcoin mining’s energy use, entitled “Cleaning Up Cryptocurrency: The Energy Impacts of Blockchains.”
And here are some resources to get caught up on what happened:
From our friends at the Bitcoin Policy Institute:The letter that prompted the upcoming Congressional hearing on mining and the environment is riddled with inaccuracies. The Bitcoin Policy Institute is sending this rebuttal to Congress to set the record straight.
From our friends at the Blockchain Association:
Also see Nic Carter in Newsweek: “Bitcoin Mining Is America's Most Misunderstood Industry.”
The SEC’s Proposed Regulation ATS Amendment
The Securities and Exchange Commission recently released a proposal ostensibly “to better protect investors and enhance cybersecurity by bringing more Alternative Trading Systems (ATS) that trade Treasuries and other government securities under the regulatory umbrella.”
However, though the proposed rule doesn’t address crypto or DeFi specifically, it could potentially have a significant impact on them due to the fact it would expand the definition of a securities exchange to include “communication protocols” - which could be used by SEC staff to envelop automatic market makers like Uniswap and even block explorers like EtherScan.
If you’re interested in learning more, check out these three great resources below:
Gabriel Shapiro of Delphi Digital, “Urgent Considerations of Impact on Blockchain/DeFi of the SEC's Proposed Regulation ATS Amendment”
Sasha Hodder, “Does the SEC's ATS proposal impact the crypto ecosystem?”
SEC Commissioner Hester Peirce’s dissent, “Dissenting Statement on the Proposal to Amend Regulation ATS”
Virtual Currency Tax Fairness Act Re-Introduced
The Virtual Currency Tax Fairness Act has been re-introduced in the House by a bipartisan group of legislators. The bill was introduced by Rep. Suzan Delbene (D-WA-1), Rep. David Schwekert (R-AZ-6) and co-sponsored by Rep. Tom Emmer (R-MN-6) and Rep. Darren Soto (D-FL-9).
This is now the third Congress in which this bill has been introduced. It would exempt personal transactions made with virtual currency from the existing IRS requirement “to calculate and report any changes in the currency’s value against the U.S. Dollar from the time they purchased the currency until it is used in the transaction.”
Our Candidate Questionnaire asks every candidate for Congress that wants the support of the crypto community in the 2022 election whether they would support this or similar legislation. It’s long overdue that we bring the use of cryptocurrencies in line with that of other currencies when it comes to a de minimus tax exemption.
Self-Hosted Wallet Fight Round Two?
Fast forward to this past week and it seems like we could be in for another round of this fight. As Nikhilesh De of Coindesk reported, the Treasury Department revealed the rule might be considered this year in its Semiannual Agenda and Regulatory Plan. In addition to Nik’s reporting, check out Jason Brett’s write up in Forbes.
United States CBDC Developments
The start of 2022 brought with it some big developments related to a potential United States CBDC (central bank digital currency).
On January 20th, the Federal Reserve released its long-awaited report on a potential U.S. central bank digital currency, entitled “Money and Payments: The U.S.
Dollar in the Age of Digital Transformation.” There is a 120 day comment period on 20 questions posed by the paper. Comments can be submitted here.
The published research describes a theoretical high-performance and resilient transaction processor for a CBDC by developing open-source research software, OpenCBDC. This collaborative effort, known as Project Hamilton, focuses on technological experimentation and does not aim to create a usable CBDC for the United States. The research is separate from the Federal Reserve's Board's evaluation of the pros and cons of a CBDC.
Finally, related to the above, on January 12th, Rep. Tom Emmer preemptively introduced legislation “prohibiting the Federal Reserve from issuing a central bank digital currency (CBDC) directly to individuals.” Learn more about that bill here.
Does anybody disagree that 2022 is going to be a historical year for crypto-related public policy?
Crypto in Congress - February 1, 2022
By Ron Hammond
We are already starting to see that February is going to be another busy month in DC for crypto policy. There are a lot of events happening and more to be announced in the coming weeks, but here’s what we are looking at…
Immediately happening right now is the Treasury amendment in the America COMPETES Act. While I’m confident the due process section will be altered the question remains if there will be a compromise or complete strike of the bad section. This is still developing
On February 8th, the House Financial Services Committee will have their 2nd full Committee hearing on stablecoins and the Presidential Working Group. Interestingly the only witness announced so far is Nellie Liang. This will be a fairly substantive and in depth hearing.
On February 15th, the Senate Banking Committee will have a hearing on stablecoins similar to the House. The Senate tends to loop in CBDCs more than the House in these conversations. Sen. Toomey has also announced his views on a regulatory framework for stablecoins.
There are rumors that the Biden Administration will unveil an executive order on crypto. In our conversations with White House staff, this isn’t going to be as substantial as many people think. The agencies are working on crypto, but this is an attempt to work better together.
Outside of crypto though there is a lot going on in DC and this could easily derail many of things in the regulatory and legislative pipeline. Ukraine, SCOTUS, primaries/elections, government funding, nominations, and other events are taking up a lot of bandwidth in DC.
Hannah Lang @hannahdlangRep. Josh Gottheimer is circulating a draft discussion bill that would limit stablecoin issuance to depository institutions AND qualifying nonbanks that maintain a 1:1 reserve of US dollars/Treasuries. More info here: https://t.co/lCsvF4hAKZ
📚 Good Reads
“Tucked Inside Biden Infrastructure Bill: Unconstitutional Crypto Surveillance,” Marta Belcher, CoinDesk
“‘Snow Job’: The Plot to Hand the Crypto Industry to the Big Banks,” Jeff John Roberts, Decrypt
“Crypto leaders launch political action committee to back congressional candidates,” Frank Chaparro, The Block
“Bitcoin Crashes The Midterms,” Ben Shreckinger, Politico
“Early birds: U.S. legislators invested in crypto and their digital asset politics” - David Attlle, Coin Telegraph
“Coinbase: Give crypto its own regulator. Everybody else: Are you crazy?,” Benjamin Pimentel, Protocol
“It's time to preserve our right to transact privately,” Rep. Warren Davidson, The Hill
“Blockchain, Brokers & Web3: Can Congress Fix The Infrastructure Bill and Grow The Decentralized Web?,” Congressional Internet Caucus Academy
“The Current State of US Crypto Regulations” Ron Hammond, Thinking Crypto
“Government Wants to Clean Up Crypto” Kristin Smith, Bloomberg
“Tom Emmer,” Anthony Pompliano, The Best Business Show
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Disclaimer: HODLpac is FEC-registered hybrid political action committee and is not legally affiliated with any party, party committee, candidate or candidate committee.