Stablecoin Regulation Is Congress’ Top Priority, Says Bitwise General Counsel

Blockworks January 14, 2023
Updated 2023/01/14 at 11:02 PM
4 Min Read

As Congress gears up for its next session with a slew of what the industry hopes will be crypto-friendly lawmakers, Bitwise’s general counsel has her eye on stablecoin regulations.

“The first Congressional focus point will no doubt be stablecoins,” Katherine Dowling, general counsel and CCO at Bitwise Asset Management, told Blockworks.

Stablecoin regulation, namely about reserve reporting and liquidity requirements, has been a long time coming, Dowling said, pointing to the bipartisan bill lawmakers failed to pass last session. With much of the legwork already done, Dowling said stablecoin legislation has the potential to be an early win for Congressional members looking to solidify some sort of crypto policy.

“Regardless of where members of congress are on the crypto spectrum — pro or con — or on the learning curve, there is a general sense that something must be done here,” she said. “The more complex, hairier topic of crypto market structure regulation will follow, but this topic will require more education, hearing and will take longer to arrive at negotiated, bipartisan agreement.”

Crypto, no longer a new issue on Capitol Hill, has already proven to be a major focus for both the House and Senate. While there were several attempts at a more comprehensive legislative package, a more focused approach is probably more likely in the near-term, Dowling said.

The Senate has been paying attention to the emerging asset class, most recently with a focus on crypto tax regulation and token classification, both of which will impact traders and exchanges.

New Financial Services Committee Chair Patrick McHenry, R-N.C., who made digital assets a pillar of his Congressional platform in the past several elections, created the Subcommittee on Digital Assets, Financial Technology and Inclusion. The Subcommittee will be led by Rep. French Hill, R-Ark, Rep. McHenry announced Thursday.

Coinbase rated Rep. Hill “very supportive” of the industry in its crypto sentiment calculator, based on “legislative record, media statements, social media posts, caucus membership, and public letters,” the exchange said.

Coming off of a tumultuous year for markets, coupled with bankruptcies, criminal charges and generally low sentiment toward the industry, lawmakers are feeling the pressure now more than ever to get bills over the finish line, Joe Acosta, partner at law firm Dorsey and Whitney, said.

“Without regulation, you can see how customers can easily be duped,” Acosta said, pointing out that the turf war over jurisdiction between Federal agencies needs to be cleaned up as well.

Generally, regulatory clarity will be a net positive for the space, Dowling added.

“Right-sized legislation in the space will be a huge boon to the industry and while there may be some pain points in the short term around preparing and organizing, over the long term we will all benefit from clear rules of the road,” she said.

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