The Senate had a last-minute bipartisan vote to overturn an S.E.C. staff accounting bulletin (SAB 121). SAB 121 wasn’t too friendly to the Crypto industry, so the vote was good for the crypto industry. Moving forward, the House threatened to erase the S.E.C. Crypto policy, but President Joe Biden opposed it.
We were also not expecting the S.E.C. to approve spot Ether ETFs, but they did. Let’s see what Senator Cynthia Lummis says about all this in the latest episode of Laura Shin’s Podcast.
Laura Shin: Why the SAB 121 approval was Bipartisan
Senator Cynthia Lummis: There are two reasons why the SAB 121 was bipartisan. Some voted against the Staff accounting bulletin because it needed to undergo proper procedures. It should have gone through a typical rule-making process on an average day. There should have been room for public comment, but staff guidelines instituted it. The others who voted with me did so because SAB 121 does not protect consumer interest.
You are a custodian, and I had an asset placed with you. Let’s say the custodial business fails; my assets show up as yours, not mine. Most people see this as a bad policy: assets belong to the consumers rather than custodians. These are the two reasons it was bipartisan in the House and the Senate. We are curious to see what happens next with the decisive vote on both sides of the Capitol Building.
Source: X
Laura Shin: Will President Joe Biden veto the resolution?
Senator Cynthia Lummis: There is no conclusion on this subject matter; The issue is still on President Joe Biden’s desk. When the Congressional Review Act process started, I talked to the people in SEC.
I asked them to withdraw SAB 121 to skip the long process they all got into. But they had no intention of withdrawing, and they felt President Biden would veto it. I hope that the president will not veto this bill. They should go through the proper channels if they feel they are on the right track based on policy. They should use the Administrative Procedure Act (A.P.A.), do it as a rule-making, get public comment, and proceed.
When the House passed it with bipartisan support, it exceeded partisan boundaries. The strength of that vote surprised the administration.
Laura Shin: Did the SEC Ether ETFs approval surprise you?
Senator Cynthia Lummis: It surprised almost everyone. Sen. Gillibrand and I are trying to make a policy for a legislative framework for digital assets. The administration is resisting. They feel they have the tools to handle it. Even if they have the tools, they intend to use them in an enforcement rather than a policy setting. There are no rules on how things work. They have only been making guesses and working with the SEC, hoping their guesses are correct.
That’s not good public policy; we should be sure of the policies for investment products. That’s different from the American way. We have a legislative process that sets the road rules. Sen Gillibrand and I vetted their bill, inviting comments from many groups. They’ve been the more transparent lawmaking process, and the S.E.C. has been the more unclear process. So, I hope they are getting pressured to be more transparent.
Source: X
Laura Shin: Is there a Bipartisan Majority in Congress that is in Favor of Crypto?
Senator Cynthia Lummis: It was challenging to tell. The Senate could keep primary legislation in committees with jurisdiction over the bill’s parts.
Patrick McHenry is moving legislation in the House between SAB 121 and the Senate. We saw a path forward for this now, but he has the gravitas to move along. So, I think they are starting to see bipartisan support and can now move forward. It has been a positive week for digital assets on Capitol Hill.
Policymaking is a struggle. With different political views in the House and Senate, getting legislation would take a lot of work. It would be more challenging if the bill didn’t have a partisan taint. The good news about digital assets is that they are not partisan subjects. In the Democratic Party, some people do not support assets that are not under the government’s control. So, the Democratic Party may never adapt to an asset we can use as a currency without government control. Most Democrats feel that it will be some competitor that undermines the U.S. dollar.
Source: X
People have been adopting Bitcoin and Altcoin over the past couple of years. So adoption is growing, and it’s not common knowledge to pretend it might disappear. Companies and individuals that were against Bitcoin are now adopting it. BlackRock and JP Morgan are clear examples.
Laura Shin: Your thoughts on Stablecoin regulation and avoiding a Terra Luna situation
Senator Cynthia Lummis: Certain government groups raised concerns about stablecoins. They feel stablecoins have the potential to destabilize the U.S. dollar or the banking system. The Lummis-Gillibrand draft distinguishes stablecoin work from some of their other work. Sen Gillibrand introduced standalone legislation, allowing everyone to see, amend, and discuss it. The Lummis-Gillibrand stablecoins bill is 100% hard-asset-backed.
Look at the Terra Luna issue for the stablecoin that protects consumers. It was an algorithmic stablecoin that had a spectacular failure. We wanted to ensure that it doesn’t have a Terra Luna structure. We want consumers to know that a 100% hard asset-backed stablecoin would be the standard under U.S. law.
The House is also voting on FIT21. The Lummis-Gillibrand bill is similar, so how do they differ?
Source: X
Laura Shin: What are the differences between the Lummis-Gillibrand bill and FIT21?
Senator Cynthia Lummis: There are many similarities and differences between FIT21 and the Lummis-Gillibrand draft. FIT21 is the Financial Innovation of Technology for the 21st Century Act. The FIT21 bill would regulate the crypto market. Lummis-Gillibrand creates an ancillary asset category that allows for differentiation between asset types.
In my case, I prefer ancillary assets over altcoins and digital assets. Ancillary assets are easy to characterize, unlike some altcoins. If the FIT21 bill comes to the Senate, I would want to sit with Sen. Gillibrand and Patrick McHenry. I want to see if they can merge their draft to address that issue.
Laura Shin: How do you feel about the denial of a master account for Custodia Bank?
Senator Cynthia Lummis: Custodia Bank is a Wyoming-based charter whose unique purpose is to be a depository institution. The FED denied it a banking master account. Lummis wrote an amicus brief for Custodia in its lawsuit against the F.E.D. and Kansas City Fed.
If an institution applies for a master account and meets the criteria, the FED does not have the discretion to deny it. Once the institution meets the requirements, it must issue a master account.
Source: X
Laura Shin: Given the recent ban on operations in Wyoming, is there a move against Bitcoin mining companies in the U.S.?
Senator Cynthia Lummis: President Biden banned a Wyoming Chinese-owned mining company near a U.S. nuclear base. Suppose the information had been available to the CIFAS. It could have made them believe that the mining company was a cover for unidentified CCP-related activities.
CCP-related companies bought land close to the nuclear warhead base. Wyoming has three atomic warheads—one in Montana, the other in North Dakota, and the third in Cheyenne. The mining company’s proximity to the nuclear military base raised many concerns. Sen Lummis feels the ban was not a move against Bitcoin mining. Instead, it might be an anti-CCP-related corporation next to a U.S. military base. There are other Bitcoin mining operations in Wyoming at the Rural Electric provider. They have an agreement and are under the umbrella of rural electric associations. They are utilizing the agreement’s electric functions.
Laura Shin: What’s your Suggestion Regarding the Industry’s Goals?
Senator Cynthia Lummis: The crypto industry influenced the previous election policies in Washington, D.C. The industry should get close to senators and House members and educate them about the industry. They should also contribute to their campaigns to support those willing to collaborate. Top industry players should use this opportunity to build relationships with policymakers. The relationships you make during the elections will play out in years to come.
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