One way or another, the US crypto industry is likely to receive an official policy defining which digital assets receive what treatment and from which federal agencies. The problem: it may not last.
Securities and Exchange Commission Chairman Paul Atkins is focused on reversing the “head in the sand” approach he accuses his predecessors of having on crypto policy, and is ready to issue rules that give the industry the regulatory clarity it craves. The problem, however, is that such rules will not be set in stone and can be eliminated by the same type of vote by the commission that implements them. They will not be backed by a specific law that makes them invulnerable to future administrations.
“We need a firm foundation in the statutes so we can’t have any setbacks in the future,” Atkins told the Senate Banking Committee in testimony Thursday. No matter how enthusiastic you are about giving the industry innovation-friendly rules, they are not “future-proofed.”
But legislation in the US Senate that would regulate such things is failing. Cryptocurrency executives and bankers have been unable to reach an agreement on one of the sticking points in stablecoin rewards programs. And Democratic lawmakers have not been offered answers to several of their key concerns, including the full staffing of regulatory commissions and the danger of conflicts of interest when top government officials have deep business ties to cryptocurrencies (most obviously, in their view, President Donald Trump).
Senator Mark Warner, a top Democratic negotiator on the Digital Asset Market Clarity Act, which still needs a hearing on the banking panel, said there is still a large bipartisan group working hard on the bill.
“We want to get this done,” he said, noting that Democrats have not yet abandoned talks. “It has to be done safely.”
Their main concern is decentralized finance (DeFi) and preventing bad actors from using it for illicit purposes. Warner’s views on this have, at times, shaken the industry and been seen as a threat to the future existence of DeFi projects. But the latest conversations about the bill’s treatment of illicit finances have yet to come to a focus.
“We have to make sure we don’t set up a regime that enables bad actors or eliminates law enforcement,” Warner said.
One Republican lawmaker, Sen. Bernie Moreno, commiserated with the SEC chairman, saying, “Congress has failed miserably to give them laws.”
Atkins reiterated that his agency has “pretty broad authority” to write rules that put crypto companies on a clear regulatory footing, as it has been trying to execute with its “Project Crypto” agenda. But, he said, the rules would need to have legislation “underpinning” them.
“I think we need a good law coming out of Congress,” Atkins said.
Read more: The big US crypto bill is on the move. Here’s what it means for everyday users
So far, a similar version of the Clarity Act already passed the House of Representatives last year. And just last month, another version passed the Senate Agriculture Committee on a party-line vote. However, when it comes time for the full Senate to vote on a final market structure bill, the industry will need at least seven Democrats like Warner on board, and potentially more, if Republicans are not unanimous.
While Senate Banking Committee Chairman Tim Scott struck a hopeful note Thursday about the Clarity Act, even industry leaders like Coinbase CEO Brian Armstrong have shown a willingness to withdraw their support if the policy doesn’t seem right. And Treasury Secretary Scott Bessent called out crypto industry “nihilists” who are willing to stand in the way, saying they should move to El Salvador if they don’t want vigorous regulation.
The support Atkins needs for the pending SEC rules remains uncertain, although the White House has ordered negotiators to find common ground before the end of the month. The clock is ticking, as House Financial Services Committee Chairman French Hill put it.
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