Battle on the Hill: Crypto's Big Week in Washington

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1:30Ron Hammond, welcome to Real Vision Crypto. Thanks for having me. Really appreciate it. Yeah, it's a pleasure to have you on the show. So much to talk about right now. Obviously, a lot happening in your sphere, which is what's happening in government, in legal, regulatory, and compliance around digital assets. Before we get into that, I want to take a quick look at price because we've got a little bit of movement here today. Bitcoin on my screen right now trading at 28 ,451. That's down quite a bit the last 24 hours, down about 2.3, about 2, call it 2.75%, 2.75%. On a weekly basis, we're off about 6.5 % right now.

2:06So obviously, a little bit of movement here to the downside after this rally we've had in Bitcoin. Ethereum trading at$1 ,946 on a 24-hour basis. That's off around 2%. and on a seven-day basis off around 2.64%. So off a little bit less than Bitcoin during this little mini cycle here. Lots to talk about, Ron. Obviously, we've got Bitcoin and Ethereum below some key levels right now, 30 ,000 on Bitcoin below that sort of key psychological threshold, and Ethereum below 2 ,000. But you're looking at this from a much broader perspective, a much wider perspective. Lots going on right now from this legal regulatory compliance framework.

2:48Lots going on down on the Hill. Tell us, Ron, what's happening as you see it right now. Well, it's been a hell of a week, I'll tell you that. So this week, for those who may not have heard, SEC Chair Gensler testified in front of the House Finance Services Committee for the first time in over a year and a half. And a lot of folks were clamoring to ask some questions. I mean, just think at least in crypto, what's happened since last time I testified, which is October 5th, 2021. FTX, Terra, Celsius, just to name a few. and all the developments in 2022 for both enforcement actions as well as things that happened in the market that the SEC allowed to happen on its watch.

3:24So that was a pretty notable hearing and happy to go into more detail on that front. At the same time, actually the day afterwards, there was a substantive hearing on stablecoin regulation. It was actually for the first time a bill draft out there in Congress that was from both the lead Republican and the Democrat. I think we're starting to see the first steps, actually, for Congress finally moving legislation in this space. It's been quite some time, but I think we're actually going to see some potential action on the House floor and in Fine Services Committee in the coming weeks. And to be really important and telling to see if this gets across the finish line to the president's desk.

3:59Well, let's dig down to the next layer here, Ron, and talk a little bit about what's going on. In terms of where the House stands right now, what is your perception of what's happening in terms of the votes, where this is headed, and what the positions are that both political parties have staked out in the House specifically? Yeah, so crypto is really unique, actually, of a policy issue. Right now in politics, it's very toxic. It's very partisan, especially in a split Congress when you have Democrats controlling the Senate, the Republicans controlling the House, and obviously the Democrats controlling the administration.

4:32It's really hard to get literally anything done this Congress, let alone crypto, which is complicated enough. But the weird dynamic about crypto, it's not the Republicans are for it and Democrats against it or vice versa. It's actually usually along the lines of age. We've seen that no matter if you're a progressive, conservative, moderate, those who skew younger on the scale of Congress, now mind you, Congress is pretty dang old, but those who skew younger typically are actually pretty involved in crypto policy and they gravitate towards it. They like solving hard problems. It's a very complicated situation here in D.C.

5:05to solve crypto. It's a very brand new issue for policy. But at the same time, we also have the old guard, those who typically have positions of power, those who have the committee chairs, those who can decide if legislations move or die. So take Elizabeth Warren, for example, who's probably the most anti-crypto member in the Senate. She's leading a coalition of Republicans and Democrats to be anti-crypto, to put anti-money laundering or know your customer rules on every single blockchain transaction, which A, isn't feasible, but B, that bill isn't going to go anywhere. But that's what we're kind of seeing right now, where we have an old guard who is pretty adverse to crypto.

5:42I put Gary Gensler in that category as well. And at the same time, we also have the younger folks in Congress who may not hold the positions of power, but they are gravitating towards crypto. And they are also saying, look, I've seen what happened in the FTX. I see folks need to be protected, consumers were harmed. But at the same time, let's make sure this technology happens in the United States, because we're getting pretty, unfortunately, whipped over here when it comes to other jurisdictions and other countries really taking the lead here. Well, we're going to talk a little bit about MECO, what's happening in Europe in terms of regulation in just a second.

6:13But let's talk a little bit more about what you just said there, because it's something that I go, frankly, back and forth with in my own head in terms of the way that I see this. There is definitely kind of an old guard or institutionalist view that is opposed to crypto on both sides of the aisle. That does tend to skew along age lines, as you pointed out, rather than partisan lines. But there is a very clear partisan divide that seems to be developing here. And I wanted to bring up this letter from the Republicans on the House Financial Services Committee. This is tweeted out by Financial Services GOP Twitter account.

6:44And this, to me, strikes me. I believe this actually was tweeted before Chair Gensler came down to the Hill. But this is a quote that I think is, well, it's scathing, really. Quote, without clear rules of the road, your push for firms to, quote, come in and register is a willful misrepresentation of the SEC's non-existent registration process. The only entity to blame for the lack of registrants is the SEC itself. The SEC should take this opportunity to work with Congress to ensure innovators and investors have the regulatory clarity and protection that they deserve. Now, look, one can agree or disagree with the position that's put forth in that tweet.

7:25But the bottom line here is that this is tweeted by the Republicans on the House Financial Services Committee. Let's talk about that in terms of the partisan positioning here. That certainly seems like a highly partisan statement in a highly partisan town. It does seem highly partisan, but actually it's pretty typical, actually, when it comes to these big high-profile hearings. Again, Chair Gensler has been pretty bad about responding to congressional letters and inquiries from congressional Republicans. and candidly, congressional Democrats as well. I think the FTX situation is a really good example where we had Representative Huizenga from Michigan really pushing Chair Gensler saying, look, I asked for documents related to SPF and the really suspicious timing that y 'all, not the SEC, but the DOJ and others arrested him.

8:07If you always recall, SPF was gonna testify in front of that same exact committee, the House Planning Service Committee, back in December, in less than 24 hours before he was supposed to testify, he got arrested and then there was three weeks or so we were waiting for this arrest to happen of course it happens right when this um hearing was announced and it was about to happen and a lot of folks on both sides are saying hey sec hey doj what's the situation here and we got no clarity from chair gensler unfortunately on that front um but it's going to be expected unfortunately that's the highly partisan issue with this town but i will also point out in that letter you don't see the um republicans saying democrats are in charge or to blame there's putting all the blame here on one individual and that's chair uh gensler they're trying to say look it's not the administration it's chair gensler there's one man who's a problem here and i think also we saw in the hearing um from some democrats who actually broke political norms and attacked their own party and again that's richard or that's from the bronx he's a progressive and that's josh gotheimer from new jersey he's a moderate like i said it doesn't really matter where you fall on the spectrum it's more along the lines of age.

9:15And they were critical of Chair Gensler on the crypto front saying, this is unsustainable what you're doing. And it's honestly hurting a lot of the innovation in the United States. And for a Democrat to go out on their own and attack their own party in a split Congress like this, you really have to tick them off. And I think that was very evident there that they broke political norms to say, I'm going to step out and do what's unbearable for my party and attack my own party and say, look, get in line. So that's pretty important to highlight. Well, that is very interesting. And that's the reason why we have you on, Ron, to give a little bit of context and depth from the perspective of what's actually happening on the Hill.

9:50And it really is an intriguing sort of space to be right now. Let me ask you this. I believe there are 10 members on the House Financial Services Committee, 10 majority members in the Republican Party, excuse me, five majority members in the Republican Party, five minority members in the Democratic Party. Give us a sense of how that breaks down in terms of voting power. And if there is something that is going to come out of committee, where you see that sort of shaking out from a voting perspective. So for the little schoolhouse rock, for those who need it, a lot of legislation begins in committees and each committee is focused on very distant issues like healthcare or financial services, like banking and such, transportation, what have you.

10:29So crypto largely falls into two committees, the Agriculture Committee and the Financial Service Committee. And now folks are saying, why the Agriculture Committee? Well, actually the CFCTC, They have a jurisdiction here. Bitcoin's commodity. And so those folks are involved. But financial services, that's the SEC's jurisdiction for those folks. There's a lot of members on that committee. There's five chairs, as you allude to, for these subcommittees. And there's five Democrats and Republicans who are the ranking members and chairs. But there's a lot of folks below the dice of them who also have the vote here.

11:00And I think to my count, at least the digital assets subcommittee, for example, a subcommittee solely dedicated to crypto. That's how important it is, this Congress for these folks. There's three Democrats of that subcommittee who are very critical of Chair Gensler. I mean, I mentioned two, but the last one is Wiley Nickel of North Carolina, a Democrat. And so we've seen folks, again, break party norms and join the Republicans in being critical in this front. And I think that's why we keep saying crypto is a bipartisan issue. It has been since I've worked on it since 2017, when I worked on Capitol Hill as a Hill staffer, working on crypto legislation.

11:34and we want to make sure we maintain that bipartisan approach. Otherwise, if we make this a partisan issue, we're sort of to the election. I mean, we just have to wait to see who's present and then, you know, hope to God that whichever party's in power either doesn't hurt crypto too much or is a whirlwind for regulation. And that's no way to regulate an industry. We want to make sure we have clear, consistent rules no matter which party's in power. Hey, everyone, we're going to take a quick pause and hear a word from our partners. We'll be right back.

12:03Well, let me ask you this, just to sort of dig down a little bit deeper. So there are 435 voting members of the House of Representatives. Now, I know that this is a position that I hear, particularly from my friends in the crypto space, who say that this is a nonpartisan issue. To what extent, if you were doing the whip count, the vote count in your head, where do you think this breaks down among those 435 members from a Democrat and Republican perspective? Both, just to give us a sense of where the support is in the House more broadly, if these go to full session? Yeah, actually, that's a good question because a lot of the 435 members of Congress have not been engaged in crypto.

12:36So everything that they've been gaining is right now through media headlines or maybe what happens with Capitol Hill through some lobbying efforts, like again, through us, the Blockchain Association and the various other folks that have been involved. I'd say, you know, typically, that's when politics really kicks in. So hypothetically, you'll have the Republicans say, if it's censored the ones in charge of the House right now, you'll have Kevin McCarthy saying, get in line, follow the party norm. If you don't know about crypto, it doesn't matter. Join the party norm. That's what I'm telling you to do.

13:03That's typically what happens. If you don't know a policy issue, you usually defer to what the lead of your party says. So at the same time, so like take stablecoin legislation. And by the way, for people who don't follow this very closely, we have to say it is incredibly close right now. 222 voting Republicans, 213 Democrats. So these are wire thin margins that we're talking about. Exactly. And there are some folks in Congress who just want to buck the norm to be problems. And so there's a lot of political landmines to be aware of. But at the same time, I think - And Kevin McCarthy, of course, Speaker of the House, who you mentioned.

13:34Exactly. I mean, look, you talk about range of third margins. That guy barely got elected to Speaker. It only took him over a dozen times to try to get that vote. So it's like you're saying that there's almost that there's still votes up for grabs. The idea here is that people haven't engaged very heavily on this issue. There's going to be pressure from the whips, the folks who run the floor to say, hey, vote with the party on this. So at this point, is it fair to say, You mentioned this on the Republican side, which is that this is a – Republicans are broadly now pro-crypto in the House. Do you think it's fair to say that the Democrats, led by Steve Scalise as the minority leader, are anti-crypto?

14:05Is that a fair assessment or not? Yeah, so I think it's like Hakeem Jeffries actually is the lead Democrat, actually. And actually, it's a mixed bag, actually, because Maxine Waters, while somebody says she's anti-crypto, she's the lead financial services Democrat member. A lot of folks look to her for her positions. She is working on stablecoin legislation and it's a very balanced approach. And so when she's involved, that carries gravitas, it carries weight and folks will follow her. I think the Democrats, a lot of them down the aisle are saying, we're not sure we're gonna look to her. So she's a key power player.

14:37So I watch Maxine Waters. And again, I watch other key folks like, I take a Richie Torres or Josh Gottheimer. Josh Gottheimer is in charge of the moderate caucus. It's called the problem solver caucus. So a lot of moderate Democrats look to him and he's pro crypto. So, again, it's a very odd political dynamic, but we definitely have the votes to get something done if it were to come to the House floor. But, again, also in the stablecoin building example, it's really actually pretty down the middle road. It doesn't give industry everything they want. At the same time, it doesn't give the consumer groups everything they want either.

15:09It's pretty balanced. I should say I misspoke. Steve Scalise, of course, is the majority leader from the Republican Party, not the Speaker of the House. See, this is what happens when guys from New York talk to people down in D.C., right? We're not in the loop as you are. And this is why it's so great to have you come on and to sort of hash through this, because obviously there are a lot of names. There's a lot of functional mechanics going on in the House that, you know, we need to talk about here in order to understand how the sausage actually gets made. So talking about this, these issues, it sounds as though what you're saying is fundamentally that there are still some there's still some votes up for grabs.

15:40People have yet to be convinced you have a position that you mentioned, Richie Torres, on the progressive side of the Democratic Party, who is supportive of crypto. You mentioned some Democratic moderates. Is this something that you see kind of unfolding over the next weeks, months, years? How long does it take before we get a sense of where folks stand on this? I mean, I imagine that with most political issues, until you speak about it, right, until you come out and take a position publicly, there's probably some room to maneuver behind the scenes, particularly on the more nuanced issues. No, exactly.

16:09And actually, crypto really hasn't come up for a full vote, actually, except for one instance. And that was in the infrastructure bill in 2021. And that wasn't the House. That was in the Senate. For those of you who don't remember, there was a small provision for tax reporting that's basically said you could be a crypto miner, an exchange, a Coinbase. You can be a DeFi platform, but you're going to have to report 1099-C-IRS. Now, that makes sense for the Coinbase and Robinhoods of the world. And actually, they agree that that should apply to them. But for crypto miners, they don't collect that data.

16:40And so we had this huge fight, actually, in the Senate during the infrastructure bill. And actually, the crypto lobby, there was not that many of us on the lobbying front. We were able to delay that bill actually over a whole week because we were able to say, look, this one small provision in this thousands of page bill that's going to fund the nation's infrastructure, we got issues with. And by the way, one of the things that was said about this at the time is this is proof that legislators just don't understand the way crypto works. It's not appropriate to ask for 1099s from miners. They're not collecting that information, exactly as you said.

17:09Exactly. And so it's a very complicated situation. Actually, that issue is still being resolved. but most folks don't know this, but we had the votes. You need 60 votes to win that over. The Senate has a lot of weird rules and stuff like that. And so unfortunately we lost because of a procedural rule because one member said, hey, if we're going to vote on amendments, I want my amendment in, even though it's not related anywhere related to crypto. If you get one vote on one amendment, I need one vote on my amendment as well. So that ended up killing the whole thing. But folks don't know this, but we had the votes.

17:38We had over 60 centers say good go. And that concludes a totally unrelated issue. It had nothing to do with crypto, let alone collecting data, right? Correct. And it was just a very small thing. Look, we want to make sure that Coinbase and other folks provide 1099s. We just got to make sure we can make that definition. We want to change three words. That's it. Three words, narrow the bill to make sure it makes sense. It's actually, to your point, feasible and actually what can be applied by a regulation. And unfortunately, that wasn't the case just because of procedure. But we had the votes in 2021.

18:08And so in 2023, we actually had a lot more education. And the four or six lobbyists in 2021 is now 40 to 60 lobbyists in D.C. And we're a force to be reckoned with, which is pretty exciting, even though we're being outspent heavily now by the banks and other fintech groups. And we're going against them pretty heavily. In some cases, like last year, we were going against SPF. So we kind of sometimes go against our own for better for us. Well, it's also interesting. I mean, one of the reasons that lobbying has expanded so dramatically in Washington on these issues is because there's a constituency between one in five or one in six American adults owns or has owned cryptocurrency.

18:45There are a lot of folks who vote who care very much about this issue, including, I'm sure, our viewers. Yeah, actually, that's a thing that I've been really shocked by and I'm really encouraged at the same time, where crypto is becoming a home grassroots issue. where now you have folks saying, look, I own crypto. I want to make sure that I keep my crypto in my exchange. I want to make sure I'm protected. But at the same time, I also love this technology. And I really hate seeing some of our members of Congress saying, this is stupid, outright dismissive, or this is all FTX entirely. This is all a scam.

19:17They don't support folks like that. And we've seen that play out in the election a little bit with Brad Sherman, who is also a pretty notorious anti-crypto folks. But also we've seen this on the fundraising side too, where folks are able to use crypto to fundraise for Republicans and Democrats. And that's been really important to keep our champions in Congress and also to fight against those who can't really be a nuisance. And so it's been good to see that kind of rallying happening recently because that wasn't always there, especially when I worked on the Capitol Hill. There was no one on the lobbying front except for two or three people.

19:47And donations to members of Congress who are pro-crypto were pretty much non-existent. Yeah, let me ask you about this, just to shift gears here a little bit. But the big fireworks moment down on the Hill with Chair Gensler testifying was with Patrick McHenry, Representative Patrick McHenry, a Republican of the state of North Carolina, I believe, asking Gary Gensler, Chair Gary Gensler at the SEC, about whether or not ETH Ethereum was a security. Comments on that, thoughts. That was the moment that got the most airplay in terms of Twitter clips on video making their rounds. And rightfully so. We've been hearing this for quite some time.

20:19I mean, I dealt with this when I was a Hill staffer. I dealt with this on the lobbying front as well, where a lot of our companies go in and say, hey, SEC, we want to talk to you. You have an open door policy. We want to have some clarity, especially for our tokens. And there is no clarity whatsoever. Actually, there's more questions than answers afterwards, usually. And then usually the takeaway from a lot of our companies who do go in and talk to the SEC is I got no clarity except that I'm probably at the end of enforcing action. Yeah, I saw on another show where you said, essentially, no matter what approach you take, you're going to end up on the wrong side of a Wells notice.

20:51Exactly. I mean, you can be Coinbase, who's been spending millions of dollars lobbying, who's taken 30-plus views in the SEC, and get a Wells notice. You can be Binance, who's doing pretty sketchy things, candidly. They've gotten caught by some regulators, have no engagement in D.C. They just actually just hired some lobbyists recently. But they're the ones who are not getting a Wells notice right now. They probably will pretty soon, from what it sounds like at the DOJ investigation. but Coinbase and Binance, no matter the approach, they get the same action. That's no way to regulate an industry.

21:20And then candidly, if you're other folks like saying, like Kraken, for example, like what's, no matter the approach, we're still going to get hit at the same time. That's no way to engage DC. And so they're scratching their heads saying, what's next? How do we rectify this? And it's really tough. That's where other jurisdictions are just taking the lead here. And it's really sad to see. Hey everyone, we're going to take another quick break and hear a word from our partners. We'll be right back to the Real Vision Crypto Daily Briefing.

21:50Well, that's exactly right. And that's exactly what I wanted to ask you about next, which is what's happening over in Europe, MECA. This is, of course, the key framework agreement from the European Parliament about how to deal with digital assets just passed in a landslide vote, 517 to 38. What is MECA? What does it do? And what's the significance? So MECA is the EU's attempt to create a regulatory framework. Now, mind you, again, like I said, it's a pretty balanced approach because a lot of folks in the crypto industry were really concerned, especially when it comes to things like self-custody.