Democrats divided over crypto’s future

But a new generation of progressives, and several other high-level Democrats, are embracing the startup industry. They argue against regulations that could stifle what advocates say is a new avenue for financial inclusion and an innovative alternative to traditional banks.

“The project to radically decentralize the Internet and finance strikes me as a deeply progressive cause,” said Rep. Richie Torres (DN.Y.) said in an interview. “No technology should ever be defined by its worst uses. … There’s more to crypto than ransomware, just like there’s more to money than money laundering.”

The latent conflict will intensify in the coming months. President Joe Biden last week called on federal agencies to begin solidifying the federal government’s approach to cryptocurrencies, framing the move as supporting innovation rather than cracking down on the industry. The price of Bitcoin rose on the news. Separately, Democratic lawmakers have begun drafting a series of crypto regulation bills that also expose a wide range of views on the government’s role in the process. $1.7 trillion market for digital assets.

The lack of consensus among Democrats means that Congress is unlikely to act soon to pass major legislation setting the direction for regulation of the new market. Some Democrats and lobbyists expected initial votes earlier this year, but that deadline has been pushed back.

Crypto watchers got a preview of the split last year, when Democrats, including the Senate Finance Chairman Ron Wyden from oregon fought to reduce a tax provision in what became the Biden bipartisan infrastructure law which imposed new reporting requirements on virtual currency trading.

“It’s fair to say that there are different perspectives on how to run the space in general,” the representative said. jose gottheimer (DN.J.), author of industry-supported legislation that set rules for cryptocurrencies known as stablecoinswhose value is linked to an underlying asset such as the dollar.

The emerging enthusiasm for cryptocurrencies among many Democrats contrasts sharply with the views of leading progressive lawmakers like Warren, chairman of the Senate Bank. sherrod brown (D-Ohio) and Rep. Brad Sherman (D-Calif.), who have been mounting criticism about the risks to consumers and the financial system.

Warren, who has been discussing the development of a comprehensive crypto bill, recently warned that Russian leaders and billionaires may use the digital currency to evade sanctions imposed after the Ukraine invasion. The industry responds that the risk is being exaggerated. Treasury officials also say there has been little evidence of the Russians using the relatively small crypto market to circumvent sanctions.

Warren addressed a letter to Treasury on the issue earlier this month and was joined by Brown, Sen. warner brand (D-Va.) and Sen. Jack Reed (DR.I.).

It is Warren’s latest attempt to highlight what she and other opponents see as a lack of regulation in the market.

“The banks have not served the American public well,” Warren told reporters when asked if he saw any social benefits to cryptocurrencies. “There is a reason cryptocurrencies take hold in some areas because banks continue to impose transaction fees at a time when the cost of transactions should be falling rapidly. However, replacing it with an unregulated and unverified system where fraudsters, cheats and terrorists mingle with ordinary consumers and no one can tell who is on the other side of a transaction is not a safe substitute.”

The clash can be explained in part by the growing influence of cryptocurrencies in Washington and in member districts. The industry is amassing an army of lobbyists and enlisting former Democratic lawmakers and regulators to further its cause. It comes as crypto startups have set up shop across the country, with state and local leaders looking to become home to businesses and jobs.

Rep. jim himes (D-Conn.) said the crypto industry has gotten big enough that “some of us are paying parochial attention to these businesses.” He cited the decision of Digital Currency Group, a so-called cryptocurrency conglomerate, to move its headquarters to his state.

“I am not alone,” he said. “All kinds of well-funded cryptocurrency businesses are springing up across the country. … People are showing a parochial interest because while we all feel like we won’t know exactly what it’s going to look like, there will be jobs associated with this technology.”

Torres, a freshman member of the Congressional Progressive Caucus, said New York City, which he represents, should embrace crypto if it wants to remain the financial capital of the world. Among local leaders, Mayor Eric Adams is one of the most outspoken cryptocurrency backers in the country, going so far as to convert his salary into Bitcoin and Ether.

Torres said that cryptocurrencies and the underlying blockchain technology “have the potential to lead to a better, cheaper and faster payment system” that could, for example, help a Dominican immigrant in his South Bronx district send remittances. with minimal fees and delays.

He said regulation should be “surgical” and that significant moves by federal agencies without direction from Congress would be a “power grab.” There is a “kind of xenophobia against cryptocurrencies” among some regulators and lawmakers, he said.

“The future of finance and the Internet should not be left in the hands of a gerontocracy of regulators who seem to be on a personal crusade against cryptocurrencies,” said Torres. “Congress, which has a new generation of legislators, should have the last word.”

Several Democrats are focusing on the potential opportunities for cryptocurrencies to reach Americans, particularly people of color, who have traditionally been ignored by the banking system. A survey commissioned late last year by venture capital giant Andreessen Horowitz, a major investor in crypto startups, found that 30 percent of black Americans and 27 percent of Hispanic Americans said they owned cryptocurrency. compared to 20 percent of Americans overall.

“We are already seeing some of the hopeful and optimistic possibilities in cryptocurrencies,” said Sen. Cory Booker (DN.J.) at a hearing last month, calling it a “democratizing” force that offers “a lot of hope.”

Morgan Harper, a former senior counsel at the Consumer Financial Protection Bureau, an agency brainstormed and launched by Warren, has touted the potential economic benefits of cryptocurrency for Ohioans while running for the Democratic nomination in the US Senate race. USA of the state. She has argued that a decentralized financial system like the one that powers cryptocurrencies could be better for consumers than a system dominated by intermediaries like banks.

“We have some people in Washington who have already been elected who have their views,” he said in an interview. “But there are plenty of other people like me who are in learning mode.”

Sam Sutton contributed to this report.