The deep-pocketed cryptocurrency industry seeks to influence regulators and the future of the Democratic Party
As Vice President Kamala Harris’ campaign embraces crypto and former President Donald Trump is hocking a new collection of NFTs, the fight to regulate the crypto industry is running up against a campaign season awash in industry cash.
While Harris has yet to announce an official position on crypto, the emergence of groups like Crypto4Harris and the announcement that a top super PAC backing Harris will accept crypto donations is signaling a shift in the Democratic approach to the growing sector.
Over the past few months, party members seem to have pivoted to a less antagonistic stance on crypto, potentially hoping to avoid a deluge of spending aimed at defeating Democrats this November. The pivot is also reflected in the bills being bandied about that are aimed at shaping the future of crypto regulation in the United States.
Sens. Kirsten Gillibrand, D-N.Y., and Cynthia Lummis, R-Wyo., have a bill that is widely seen as friendly to the crypto industry. The bill includes certain changes to the tax code that would be largely beneficial for the industry. For instance, the bill would tax mined crypto at the point of sale rather than when the miner receives the crypto.
Sen. Debbie Stabenow, D-Mich., also has a draft bipartisan bill with Sen. John Boozman, R-Ark., circulating in the Senate Agriculture, Nutrition and Forestry Committee. The push behind the bill sputtered out in July, however. She has signaled that she hopes to bring the bill back up in September, though the bill’s fate is unclear given the upcoming election season. She has also struggled to find the bipartisan support for the bill that would be required to pass it through the Senate.
Lastly, the Financial Innovation and Technology for the 21st Century Act, often called FIT21, appears to be the most likely regulatory framework to become law. The bill passed the House earlier this year with the support of 71 Democrats and Senate Majority Leader Chuck Schumer, D-N.Y., has promised to bring the bill to the floor. The bill would include some regulations on crypto exchanges, like requiring that they adhere to new record-keeping rules and meet the Securities and Exchange Commission’s standards on this front.
What all of these bills have in common, however, is that under them, most crypto would be regulated under the Commodity Futures Trading Commission (CFTC), not the Securities and Exchange Commission (SEC). This has been a central point of contention in the debate over crypto regulation because securities, regulated by the SEC, generally receive stricter oversight versus commodities.
For context, if crypto is regulated as a commodity it would be subject to the same or similar rules that control the trade of gold, crude oil and agricultural products, and the financial derivatives that are traded concerning these commodities, like futures contracts. If crypto is regulated as a security, it will be subject to the same or similar rules that control stocks, bonds and mutual funds, most notably transparency requirements.
Ladan Stewart, a former Enforcement Division staffer at the SEC who now works as a partner at White and Case, described the difference in how the officials and the crypto industry see the regulation.
