Senate Banking Committee Hears Testimony on Cryptocurrency Issues

On February 14, the Senate Banking Committee held a hearing entitled, “Crypto Crash: Why Financial System Safeguards are Needed for Digital Assets.” Committee Chairman Sherrod Brown (D-OH) said the Committee will focus on seven basic principles for a digital asset regulatory framework:

(1) Clear disclosures and transparency

(2) Prohibitions on conflicts of interest and self-dealing

(3) Protecting customer funds

(4) Internal governance and risk management

(5) Strong consumer and investor rights and protections

(6) Anti-money laundering and fraud prevention

(7) Oversight and supervision

Ranking Member Tim Scott (R-SC) emphasized the need for policy that allows the U.S. to continue to grow and innovate in a safe and sound manner because innovation can increase access to traditional financial services and may foster new, emergent technologies that promote financial independence, access to credit, and capital formation. Many on the Republican side of the dais noted the importance of balancing consumer protection with the emerging uses of digital asset technology. Other Democrats on the panel, who hold the majority on the Senate side, agreed with Chairman Brown on the importance of transparency, consumer protection, and risk management.

There were several bipartisan legislative measures introduced in the prior congressional session, which will likely serve as a starting point for the legislative effort in the current Congress. Bipartisan legislation sponsored by Senators Kirsten Gillibrand (D-NY) and Cynthia Lummis (R-WY) titled “Responsible Financial Innovation Act,” as well as legislation sponsored by Senators Debbie Stabenow (D-MI) and John Boozman (R-AR) entitled the “Digital Commodities Consumer Protection Act of 2022” are both likely to be reintroduced in some form during the current congressional session. House Financial Services Chairman Patrick McHenry (R-NC) and Ranking Member Maxine Waters (D-CA) are currently working on a framework that would regulate stablecoins.