Consensus 2024 Week: The House Passed a Market Structure Bill

The House of Representatives voting overwhelmingly in favor of a crypto market structure bill is an interesting prelude to CoinDesk’s annual conference. We’ll be talking about these things in Austin this week.

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Recent passage of crypto bills – even if they don’t become law – may herald a new era in how Washington, D.C. views the industry.

Crypto industry participants have called for Congress to create new bright lines for how digital assets are regulated for years. This month’s votes, even if mostly symbolic, bring those hopes a step closer.

Seventy-one Democrats and 208 Republicans voted in favor of the Financial Innovation and Technology for the 21st Century Act last week. Just three Republicans and 133 Democrats voted against. This comes on the heels of the vote earlier this month to repeal SEC Staff Accounting Bulletin 121, which saw votes from 30-some Democrats in both the House and Senate.

The phrase I’ve heard thrown around these last few weeks is “sea change.” Between former U.S. President (and current Republican frontrunner) Donald Trump openly appealing to people who might have crypto as an important election issue to the votes over the last few weeks, this industry is (finally?) bursting onto the political scene in a way we haven’t seen before.

Last week also saw the SEC mass-approve 19b-4 forms from a number of exchanges hoping to list and trade shares of spot ether exchange-traded funds (ETFs), a stunning reversal from an expected mass denial just two weeks ago.

The more cynical among you may say that these votes are purely an election play, that they never would have happened in another year. And the election this November is undoubtedly playing some sort of role in these votes.

U.S. President Joe Biden announced he would veto the SAB 121 repeal, giving cover to Democrats to vote in favor of it, and the FIT21 bill has no real counterpart in the Senate, meaning voting for it can only boost Democrats among people who see being pro-crypto as a factor.

But a day after the FIT21 vote, a bill banning the U.S. Federal Reserve from issuing or digging further into a central bank digital currency passed mostly along party lines, with few defections. The debate was much more contentious but the result does suggest the situation isn’t just purely pro or anti-crypto (of course, this depends on whether you view CBDCs as being a pro or anti-crypto issue too).

It’s also worth noting that FIT21 had quite a bit of momentum last year, passing out of both the House Financial Services and Agriculture Committees and looking set for a House vote before then-Speaker Kevin McCarthy (R-Calif.) was ejected from his role through a vote called by Rep. Matt Gaetz (R-Fla.).

The House did not appear to recover from the weeks of lost time, having to turn to budget bills instead of resuming other votes after current Speaker Mike Johnson (R-La.) was named to the post.

In other words, while there is momentum now that didn’t seem to exist last year, these bills also didn’t come out of nowhere; Congress has been laying the groundwork for quite some time.

That there is an election this year and the crypto industry is putting together a huge war chest might just be the final sparks that led to this month’s results. We’ve already seen interest groups’ funds go toward influencing primaries and elections, a fact which other members of Congress are undoubtedly aware of.

Still, there is real interest in crypto now in a way we haven’t seen before. The big question is will the desire to work on crypto legislation continue after the U.S. election in November during the lame-duck session, or will a new Congress take up legislation after the members are sworn in in January.

Contributing factors to these questions obviously include what Congress (and the presidency) look like after the election, and whether there’s more bipartisan work to be done on these issues or if either major party will have an edge in controlling the wheels of influence.

One other note: Last week the SEC approved the 19b-4 forms from exchanges hoping to list and trade spot ether ETF products. It still has to approve the S-1 forms by the issuers themselves to create the products. There’s been speculation that this too shows a shift in the political winds around crypto. But it is worth remembering that the SEC is supposed to be an independent agency, and any suggestion that the administration is influencing it – either before, to reject the ETFs, or more recently, to approve them – suggests something far more troubling than just D.C.’s reception to crypto. There’s also so far been zero evidence provided to support the idea that the Biden administration leaned on the SEC to approve the ether ETFs.

SEC Chair Gary Gensler said last week that the agency’s decision-making was informed by last year’s famous court decision on spot bitcoin ETFs, which also conveniently provides a more reasonable explanation for why the spot ether ETFs are moving ahead.

We’ll be talking about these issues and what might happen next in Austin. If you’re in town, come say hi, especially on Thursday at our annual Policy Summit.

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Thursday

If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Twitter @nikhileshde.

You can also join the group conversation on Telegram.

See ya’ll next week!