Bitcoin continues its upward surge, and the crypto industry is on pace for record lobbying expenditures, according to Reuters, but legislation in Congress remains as stalled as ever. Most recently, House Financial Services Committee Chair Patrick McHenry (R-N.C.) attempted to attach the crypto market structure bill passed by his committee and the House Agriculture Committee to the FY24 National Defense Authorization Act, the annual defense policy bill. McHenry’s campaign won non-crypto concessions, but Democratic objections to his proposal meant including it would have killed the larger package, an unacceptable outcome for Congressional leadership.
McHenry’s objection even eliminated a measure intended to impose new anti-money-laundering requirements on the crypto industry in the final draft of the NDAA. The proposal was not controversial in the Senate, with support from members on both ends of the spectrum of views on crypto, including Senators Cynthia Lummis (R-Wyo.) and Elizabeth Warren (D-Mass.). This rebuttal was not a crypto-targeted effort, as McHenry forced the removal of all financial services-related measures in the NDAA, leaving crypto legislation caught in the crossfire.
Despite these defeats, there is still some hope among House Republicans that 2024 could be better. Rep. French Hill (R-Ark.), chair of the House Financial Services Committee’s digital assets subcommittee, said last month on CNBC’s “Squawk Box” that both the market structure and stablecoin bills may get floor votes in the House “early in 2024.”
What will be most difficult is finding floor time for the legislation, with at least January likely dedicated to averting a government shutdown. However, if the bills were to be voted on, they would have a reasonable chance to pass in largely partisan votes. Similar to the committee markup, some Democrats may back the measures, but without revisions, it is doubtful there would be significant support. The stablecoin proposal remains the best opportunity to create a broad bipartisan bill. However, Senate Democratic leadership has shown little interest in the proposal, leaving the House to negotiate the bill instead.
One new factor in this debate is McHenry’s retirement, first reported by Politico on Tuesday. McHenry has been one of the digital asset industry’s most prominent proponents in Congress and has occupied a powerful seat as the House Financial Services Committee chair. McHenry intends to serve the remainder of his term, which will see him keep the gavel through next year.
With the end in sight, though, McHenry will want to make a big push between now and the August recess to secure legacy legislation, which could be one of his two crypto bills. It is doubtful the chair will abandon his values to get something done, but leaving office is the ultimate deadline for a deal and could see McHenry more inclined to compromise than he otherwise would be.
What will be important for the future chances of crypto legislation is the battle to succeed McHenry and take over Republican leadership on the committee. There is no shortage of potential replacements, with several senior House GOP members holding seats on the committee, including Reps. Blaine Luetkemeyer (R-Mo.), Frank Lucas (R-Okla.), Bill Huizenga (R-Mich.), Andy Barr (R-Ky.), and Hill.
Fortunately for the crypto industry, these possible future chairs are all largely sympathetic toward their business. The most significant difference between the options will be how they prioritize the committee’s agenda. Hill may be the digital asset industry’s top choice, given his role in crafting the legislation with McHenry this past year and the likelihood of putting crypto near the top of his to-do list, but none of the options would be harmful.
The odds of success for any of these future legislative drives will depend significantly on the outcome of the 2024 elections, with control of the White House and Congress up for grabs. If neither of McHenry’s bills are passed into law, they will still serve as a starting point for future proposals. How lawmakers view these measures, though, may be different if a spot Bitcoin exchange-traded fund is approved in January, particularly if regulators change their tune about the need for additional legislation to provide them with sufficient authority to oversee the crypto industry. Still, the needed inertia to get these measures across the finish line may only come with a black swan event that threatens broader financial stability, as 2022 demonstrated disruption in the digital asset space alone is insufficient to get Congress to act.