WASHINGTON — Lawmakers in the U.S. House of Representatives plan to meet in the coming weeks to discuss cryptocurrency-related legislation, and one Arkansas lawmaker is ready to play an active role in establishing regulations for digital assets.
Republican leaders with the House Financial Services and Agriculture committees on Friday put forward a legislative discussion draft on regulating digital assets. The proposal addresses uncertainty involving cryptocurrencies and current regulatory oversight.
U.S. Rep. French Hill, R-Little Rock, helped announce the legislative framework. A former banker, Hill is a leader on Capitol Hill concerning cryptocurrencies and digital assets and serves as the House Financial Services Committee’s vice chair and leads its Subcommittee on Digital Assets, Financial Technology and Inclusion.
“Legislation from Congress is needed to protect U.S. consumers and investors, as well as to preserve America’s role as a global leader in finance, technology and innovation,” Hill said Friday in a statement.
“The discussion draft from the House Financial Services and Agriculture Committees represents a common approach to digital asset regulation that would bring existing consumer and investor protections to digital asset-related activities and intermediaries under the principle of ‘same risk, same regulation.'”
Federal lawmakers have ramped up efforts in recent years to address cryptocurrencies given rising popularity. State and federal agencies regulate cryptocurrencies under structures that predate the rise of these digital assets, resulting in multiple agencies reviewing investments with limited authority. The U.S. Commodity Futures Trading Commission, for instance, has limited regulatory authority while the Securities and Exchange Commission can take action against illegal activities.
“Sometimes, figuring out how to comply with these preexisting rules is really hard,” said Carol Rose Goforth, a distinguished professor of law at the University of Arkansas who studies cryptocurrency and digital investments.
Goforth, who spoke to the Arkansas Democrat-Gazette prior to Friday’s announcement, noted existing regulations fail to cover all assets, meaning some investors can evade regulatory authority.
“If all we do is force cryptoassets into regulatory structures that were drafted with different kinds of interests in mind, it often does not work well,” she said.
The United States is not the only country facing challenges with regulating digital assets, but Goforth emphasized it is “not one of all.” She made note of action by the European Union, whose Parliament approved new rules in April for regulating platforms and monitoring transactions.
“You have the companies that are spending thousands of man hours trying to figure out how to comply [who are] competing with companies that may be much less interested in devoting their resources to that,” Goforth added.
“It’s like the good companies are actually at a tremendous disadvantage because it’s so much cheaper just to not comply and hope you don’t get caught.”
Federal lawmakers intensified their push for modern regulations after cryptocurrency exchange FTX filed for Chapter 11 bankruptcy last December.
In an interview with the Democrat-Gazette before Friday’s announcement, Hill cited FTX’s collapse and the fall of the Luna digital currency as reasons for legislative action.
“What we are doing in the House is writing the first bills that will give a regulatory framework for digital assets that protects investors, protects consumers, but very importantly, creates an innovation space here in the U.S. for the expansion of the use of digital assets,” he explained.
On Friday, Hill joined House Financial Services Committee Chairman Patrick McHenry, R-N.C., and House Agriculture Committee leaders in releasing the discussion draft of a regulatory framework. The proposal addresses confusion involving the commodities commission and SEC by presenting language for determining regulatory authority for both agencies.
The House Agriculture Committee and its Senate counterpart handle matters involving commodities — including cryptocurrencies — and related transactions. The leading senators on the Senate Agriculture, Nutrition and Forestry — Michigan Democrat Debbie Stabenow and Arkansas Republican John Boozman — introduced legislation during the last Congress to provide the commodities commission with additional regulatory authority over trading platforms.
“For months, our committees have worked collaboratively to establish a viable regulatory framework for digital assets necessary to protect consumers and promote American innovation,” House Agriculture Committee Chairman Glenn Thompson, R-Pa., said Friday in a statement.
“Today’s release of the discussion draft brings us one step closer to bringing regulatory certainty to these novel and emerging technologies.”
According to Hill, another subject of an upcoming hearing involves the creation of a central bank digital currency, a digital asset managed by a country’s central bank. The United States Federal Reserve has studied such currency, but the central bank has not made any decision on issuing such an asset. China and the Bahamas are among the small group of countries with a central bank digital currency.
Hill and Massachusetts Democratic Rep. Jake Auchincloss have proposed legislation prohibiting the Federal Reserve from implementing a central bank digital currency. Hill told the Democrat-Gazette if people sought a central bank digital currency, they would have to create an account with the Federal Reserve, meaning transactions would pass through the central bank.
“I get a lot of mail on this thinking that we, the United States, are proposing to have a central bank digital currency, to be a Chinese-like surveillance system,” he said. “I would argue that’s not true. That’s not going to happen, and there’s strong bipartisan opposition to that kind of thing taking place.”
Goforth said managing a central bank digital currency presents national security risks given the sole controlling authority.
“If you have a (central bank digital currency) where the bank or the Federal Reserve or a single-centralized banking authority in different countries has control over the ledger, all you have to do is hack those computers, those nodes, and you run the risk of being able to completely disrupt the finances of the country to the extent that they are on that ledger,” she explained.
In comparison, current cryptocurrencies like Bitcoin have a decentralized record widely distributed across a network.
“If you can hack a CBDC ledger, oh my God, that would be catastrophic,” Goforth said.
Hill anticipates the House Financial Services Committee will consider cryptoasset legislation this month with the goal of sending measures to the full House in July.