As many of my followers likely know I work for Congress on a House of Representatives Committee and while it can be an amazing job it can also be one of the most stressful stomach-churning things as well. One of the biggest things that I have tried to do since I took this job was to share and relay what is going on on Capitol Hill. Given how the media tends to add their own slant onto things and how divisive crypto can be on the political stage I want to give y'all the clean cut know of what is going on. 

To give y'all some context last year we had a series of bills introduced in both the House and the Senate. None of the pieces of legislation that were released or introduced last year were expected to pass or go anywhere. These bills were more of stating different Members' stances on the industry as well as putting the legislation out there and seeing what the industry and social feedback was. At least that was the initial plan but then there was a seismic shift with the FTX collapse. This compounded on top of the Terra Luna collapse and forced some bills to get more consideration than initially planned and led to a few of them even passing certain Committees. Which did even lead me to wonder if we were going to set some sort of legislation passed by the end of the year. 

As we know how that did not come to be as other priorities came up and more importantly the elections had occurred so there was some level of partisanship that came into play that previously had not been there. Once the new Congress formed at the beginning of this year and even before the Committees were officially stood up now Chairman McHenry went on record stating that crypto legislation was going to be a focus. Not only were there going to be hearings but the legislation was going to be crafted voted through on the Committee and sent to the House Floor to be voted on and sent to the Senate.

It was pretty common knowledge up here but not so much elsewhere that crypto legislation was going to be done piece by piece. Not only is that a much simpler way to get things moved along and through but it also allows sticking points or problem areas to be addressed before the legislation is passed and signed into law. I would say since February it was all but confirmed that the first piece of legislation that the House Financial Services Committee took up was going to cover stablecoins. When the bank run happened and Circle, the issuer of USDC, was caught with $3 billion in reserves temporarily stuck in now collapsed Silicon Valley Bank. The rumor mill really started churning about this legislation and it coming out.

Then it did and I remember looking at it going... wth

Whenever Congressional control in either the House or the Senate flips it is safe to say that the legislation that was being worked on, even bipartisan legislation like this, will change as the party in control has the upper hand in its final version. So I was pretty dumbstruck when I looked at what was released and compared it to what had previously been I had seen late last year. Yes, there were changes and I guess you could say that the bill was more Republican in nature but it still fell extremely short of what I had expected. Before I sound like I am just bashing the bill it did have some good elements in it like finally creating definitions and requiring stablecoin issuers to seek licenses that would require them to be fully backed. Out of all the feedback though the craziest part was how the Democrats came out en mass bashing legislation that in essence they had crafted just 6 months ago! One person has noticeably been quiet about this proposed bill though and that has been the former Chairwoman of the Committee Rep. Maxine Waters whose bill this essentially was. 

Now as some Members have come out and said and something that I tend to believe is that this draft legislation that was released the day before the stablecoin hearing last week was not ever supposed to be perfect. It was released to get the idea out there and then to allow feedback from the crypto industry which we saw the very next day and really every day since the release. An important thing that it also did was expose a critical issue any legislation is going to have and that is how crypto skeptic/hater Sen. Sherrod Brown is going to cause as many headaches as he can on the Senate side where he is the Chairman of the Senate Banking Committee and would have to sign off on any crypto legislation like this. If this bill follows how other bills that Congress is serious about working on and passing do it will likely enter a quiet phase where edits are made and things are tweaked based on industry feedback. It is likely that Chair McHenry and others will also be reaching out to their Senate counterparts to try and pass a version that has enough support to either A) Sen. Brown gives up and allows it to be voted on or more likely B) enough Senators support it publically that Sen. Brown is forced to stop holding it up and allow it to go to vote in the Senate. 

What has surprised me is hearing from some of the Members how this bill is nothing and should just be scrapped. They know how long it would take to relaunch a bill from scratch and throws away a ton of work and industry feedback. There are awful parts of the bill that definitely need to be addressed but that doesn't mean we just start over from scratch. Members have also been saying how there is no protection from an FTX-like event but let's not forget FTX isn't a stablecoin issuer so why should there be exchange language in the bill as it deviates from the bill's purpose to define and create clear-cut regulatory guidelines for stablecoins. 

Knowing about how slow things can move in Congress before there is a random explosion forward I would expect this issue to continue to drag out for a few more months. I think that the base case scenario would result in this bill or any crypto legislation being passed by the House by the end of July before the August recess. With a little over two months, it will be close and it might not be possible but that is what I think the best-case scenario is going to be. The idea that has been floated to scrap the whole bill and start it over from scratch only means one thing to me and that is that we will be lucky if we get it done this year then. 

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