With polls indicating Republicans will take control of at least the House of Representatives after November’s U.S. elections, the conventional wisdom in Washington is that divided government will lead to little meaningful legislation getting passed over the next two years.
While it’s true that Democrats and the GOP are unlikely to come to agreement on hot-button topics like taxes or immigration, there are a few areas, like cryptocurrency regulation, that are ripe for bipartisan agreement, according to Ben Koltun, director of research at Beacon Policy Advisors.
“The crypto momentum will only continue as its an issue that doesn’t rise to the level of inclusion in a partisan policy document, but also doesn’t neatly divide along party lines,” he wrote in a Tuesday note to clients, referring to the fact that the GOP left crypto out of its “Commitment to America” campaign agenda for House Republicans.
Bipartisan groups of lawmakers have already come together to propose new frameworks for cryptocurrency regulation. In June, Republican Sen. Cynthia Lummis of Wyoming and Democratic Sen. Kirsten Gillibrand of New York unveiled legislation that would grant oversight of the most popular cryptocurrencies, bitcoin
to the Commodity Futures Trading Commission, while giving the Securities and Exchange Commission oversight of most other digital assets.
That was followed in August by a similar proposal by two Democrats and two Republicans on the Senate Agriculture Committee that would also boost the CFTC’s role in overseeing the industry, and allow it to impose user fees to collect the more than $100 million that Chairman Rostin Behnam says is needed to fund its new responsibilities.
The Biden administration has signaled that its top priority for digital-asset regulation is stablecoins, a type of cryptocurrency that aims to maintain a one-to-one value with the U.S. dollar.
The President’s Working Group on Financial Markets released a report last November that called on Congress to pass legislation requiring stablecoins to be issued by federally regulated banks.
The document outlined a variety of risks that stablecoins pose to crypto investors and the economy more broadly, including risks related to a so-called “run” on a stablecoin’s backing assets.
Many popular stablecoins are backed by real assets, and maintain their value by promising to always exchange one token for one U.S. dollar
If investors lose confidence in the assets backing a stablecoin, it could trigger “a self-reinforcing cycle of redemptions and fire sales of reserve assets,” the report said.
A stablecoin bill being crafted by Financial Services Committee Chairwoman Maxine Waters, a California Democrat, with the input of the ranking Republican on the committee, Patrick McHenry of North Carolina could reportedly include a two-year ban on so-called algorithmic stablecoins, like TerraUSD
which blew up spectacularly early this year and led to steep investor losses.
Chances are waning that a deal on that bill is reached before the November elections, according to a Tuesday report in Politico, with McHenry telling the publication that “big policymaking in an election year is hard.”
But with months of work already done on the House bill and those already released by various Senate committees, it could be that lawmakers see a future divided government as fertile ground for crypto legislation. As Beacon’s Koltun put it, “Divided government can often breed unified agendas below the partisan headlines.”