Good morning and happy Friday. This week, we cover new subcommittee chairs likely to play a key role in shaping crypto policy in the 119th Congress.
Top Points
House Financial Services Chair French Hill (R-AR) announced Rep. Bryan Steil (R-WI)—a pro-crypto advocate focused on keeping innovation in the U.S.—will head the subcommittee focused on digital assets and artificial intelligence, while Rep. Warren Davidson (R-OH)—another crypto ally and staunch self-custody protector—will head the subcommittee focused on national security and illicit finance.
Senator Cynthia Lummis (R-WY)—a longtime Bitcoin and crypto advocate—is expected to head up Senate Banking’s new subcommittee focused on crypto.
In SEC v. Coinbase, Judge Failla granted Coinbase’s motion to pursue the Second Circuit’s review of Howey’s application to crypto asset transactions, while also pausing district court proceedings until the interlocutory appeal is resolved.
House Financial Services Announces New Subcommittee Chairs
On Thursday, Chairman French Hill (R-AR) announced HFSC leadership positions for the 119th Congress, including new subcommittee chairs.
Overview
In general, subcommittees serve as a first stop of sorts for specific policy issues within their jurisdiction. Subcommittees hold hearings on niche issues and help shape policy proposals before the full committee’s consideration. As such, subcommittee chairs play a key role in driving policy priorities and crafting legislative solutions.
Most notably for crypto:
Rep. Bryan Steil (R-WI) will chair the subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence.
Note: Last Congress, the subcommittee was titled Digital Assets, Financial Technology, and Inclusion, signaling AI will likely receive increased attention this Congress and a further integration of AI & crypto policy (see also President Trump's “AI & Crypto Czar”).
Rep. Warren Davidson (R-OH) will chair the subcommittee on National Security, Illicit Finance, and International Financial Institutions.
Below are brief overviews of their crypto policy records.
Rep. Bryan Steil (R-WI) – Chair Digital Assets, Financial Technology, and Inclusion
In short, Rep. Bryan Steil wants to keep innovation in the U.S. To this end, he has supported Congressional efforts to update existing laws and provide tailored regulatory frameworks for crypto and stablecoins.
On the House floor, Rep. Steil voted for FIT 21, a CBDC prohibition bill (cosponsored), and a SAB 121 repeal bill.
In committee, he voted to advance legislation to:
Protect the right to self-custody and peer-to-peer transactions (Keep Your Coins Act),
Provide a federal framework for issuing payment stablecoins (Clarity for Payment Stablecoins Act),
Clarify that certain blockchain developers and service providers who do not take control of customer funds are exempt from certain money transmitter registration and reporting requirements (Blockchain Regulatory Certainty Act), and
Create a working group to develop policy proposals for combatting the illicit use of new financial technologies, including digital assets (Financial Technology Protection Act).
At hearings and in public statements, Rep. Steil has consistently shown an interest in blockchain use cases, criticized regulation by enforcement, and called for Congress to proactively enact clear rules of the road to keep builders and economic growth in the U.S.
For more on Rep. Steil’s crypto policy views, watch his keynote address and a fireside chat with Coinbase’s Kara Calvert at an RNC side event last year (CryptoRNC).
Rep. Warren Davidson (R-OH) - Subcommittee on National Security, Illicit Finance, and International Financial Institutions
Rep. Warren Davidson, a long-time crypto ally, will chair the subcommittee on National Security, Illicit Finance, and International Financial Institutions.
First and foremost, Rep. Davidson is a long-time champion of protecting self-custody and the right to peer-to-peer crypto transactions.
Specifically, he’s the author of the Keep Your Coins Act going back multiple Congresses. The Keep Your Coins Act would prohibit federal agencies from interfering with an individual’s ability to self-custody or use crypto assets to conduct lawful transactions.
Additionally, at committee hearings, Rep. Davidson has highlighted how law enforcement can leverage the transparency of public blockchains to trace illicit activity.
Further, Rep. Davidson cosponsored Rep. Nunn’s bipartisan Financial Technology Protection Act last Congress, showing he is willing to work on a bipartisan basis on illicit finance issues. The bill passed Committee by a 50-0 vote and the House floor by voice vote, but stalled out in the Senate.
Last Congress, crypto policy discussions often included debates over how to best combat illicit finance concerns without interfering with privacy rights or applying unworkable rules to decentralized technology.
Rep. Davison will likely use his leadership position to ensure illicit finance proposals working through the committee are consistent with First and Fourth Amendment protections and that they do not unduly stifle decentralization or innovation.
Here’s a look at a few more bills he’s supported:
On the House floor, he voted for FIT 21, SAB 121 repeal, and the CBDC Anti-Surveillance State Act.
In committee, he voted in favor of Chair McHenry’s stablecoin legislation, the Blockchain Regulatory Certainty Act, his Keep Your Coins Act and the Financial Technology Protection Act.
Rep. Davidson also sponsored bills to:
Clarify and narrow digital asset broker reporting requirements (Keep Innovation in America Act);
Direct the CFTC and SEC to jointly study DeFi and report back to Congress with findings (Evaluating DeFi Opportunities Act);
Allow FINRA to approve registered brokers and dealers to custody qualified tokenized securities and payment stablecoins as long as certain customer protection requirements are met and until the SEC amends and clarifies existing rules (Broker-Dealer Tokenization Act).
Notes on Other Subcommittee Chairs:
Rep. Andy Barr (R-KY) will (once again) chair the subcommittee on Financial Institutions.
In the 118th Congress, Rep. Barr was the lead sponsor of the Fair Access to Banking Act, and cosponsored the Chinese CBDC Prohibition Act, a SAB 121 repeal bill, and an anti-CBDC bill.
He also voted in favor of crypto legislation in committee and on the House floor (FIT 21, stablecoins, Keep Your Coins Act, Blockchain Regulatory Certainty Act, CBDC Anti-Surveillance State Act (also a cosponsor)).
Rep. Dan Meuser (R-PA) will chair the subcommittee on Oversight and Investigations.
In the 118th Congress, Rep. Meuser cosponsored a SAB 121 repeal bill and voted in favor of crypto bills in committee and on the House floor (FIT 21, stablecoins, Keep Your Coins Act, Blockchain Regulatory Certainty Act, Financial Technology Protection Act, CBDC Anti-Surveillance State Act (also a cosponsor)).
Senator Lummis Expected to Head Senate Banking Subcommittee on Crypto
Per Punchbowl’s Brendan Pedersen, Senator Cynthia Lummis (R-WY) is expected to chair Senate Banking’s new subcommittee focused on crypto policy.
Additional Republican committee members are expected to include: Senator Bernie Moreno (OH), Thom Tillis (NC), Bill Hagerty (TN), and Dave McCormick (PA).
Senator Lummis’ Crypto Track Record
Senator Lummis has been a steadfast Bitcoin supporter and is pushing for the creation of a Strategic Bitcoin Reserve. Near the end of last Congress, she introduced the BITCOIN Act to direct Treasury to purchase a total of 1 million Bitcoins over a 5-year period and hold them for a minimum 20-year period.
Working with Senator Kirsten Gillibrand (D-NY), she’s introduced comprehensive crypto legislation (Lummis-Gillibrand Responsible Financial Innovation Act) in back-to-back Congresses, which covers rules for crypto asset issuers, the crypto spot market, tax issues, and a variety of consumer protection issues. (See 118th Congress version here).
Last year, she also introduced a stablecoin bill with Senator Gillibrand aimed at securing a compromise between House Republicans and the White House, though the proposal failed to gain traction.
Senator Lummis has also supported legislation to:
Repeal SAB 121 (lead sponsor of S.J. Res. 59);
Create a de minimis tax exemption for small, personal crypto transactions (Virtual Currency Tax Fairness Act);
Protect 401(k) plan participants’ access to Bitcoin (and other investment options) in their self-directed brokerage windows (Financial Freedom Act of 2023);
Establish marketing standards for certain crypto transactions and crypto-related services (Responsible Digital Asset Advertising Act of 2023);
Create a voluntary public-private partnership program for crypto firms and the federal government to share information to combat illicit activity (Preventing Illicit Finance Through Partnership Act of 2024);
See more: Legislative Tracker – 118th Congress.
Look Ahead
Friday, January 17 - 8pm - Inaugural Crypto Ball, Presented by BTC Inc. & Stand With Crypto ($2,500/ticket).
Senate to begin working through nomination hearings and confirmation votes, including Trump’s pick for Treasury Secretary, Scott Bessent.
Quick Hits
Congress
More House Financial Services Committee Updates
House Financial Services will have at least one new Democratic member interested in tackling crypto policy issues: Rep. Sam Liccardo (D-CA).
Per crypto policy views posted on his website, Rep. Liccardo wants Congress to start with stablecoin legislation, clarify agencies’ regulatory scopes, and create safe regulatory sandboxes.
Innovation Economy (See section “Regulating Cryptocurrency: Sensible First Steps”).
Courts
SEC v. Coinbase
On Tuesday, Judge Katherine Failla granted Coinbase’s motion to pursue an interlocutory appeal of her March 27 Order in the Second Circuit.
If the Second Circuit accepts the appeal, it will review the question of “whether transactions involving crypto-assets of the kind Coinbase intermediates are ‘investment contracts,’ and thus securities.”
Importantly, Judge Failla also paused district court proceedings in the case until the interlocutory appeal is resolved.
Docket.
FDIC
In response to a court order, the FDIC republished crypto activity “pause letters”—this time with less redactions, and along with two additional letters.
See letters here.
The letters (mostly from around late 2021 and early 2022) show the FDIC asking banks to pause certain crypto asset-related activities (e.g., allowing customers to buy, hold, and sell Bitcoin via bank’s website or mobile app), often citing safety and soundness concerns and the need for additional information.
Executive Branch
IRS/DeFi Broker Rule
Per the Congressional Review Act, the IRS submitted the DeFi Broker Rule to the House on December 31, 2024.
Here’s the final print in the Federal Register, dated December 30, 2024.
Note: A slightly revised summary of the DeFi Broker Rule included in last week’s newsletter can be found here. (H/t Taylor Reid, former Partner at Baker McKenzie, for the feedback).
Federal Reserve
Federal Reserve Board Vice Chair for Supervision, Michael S. Barr, will step down from his position, effective February 28, 2025, but will continue to serve as a member of the Federal Reserve Board of Governors.
The Fed Vice Chair for Supervision position was established under Dodd-Frank, and is tasked with developing policy recommendations for the Federal Reserve regarding bank supervision and regulations.
CFTC
CFTC Chair Behnam will step down on February 7, 2025. It remains to be see who President Trump will choose to replace him.
In a keynote address to The Brookings Institution, Chair Behnam once again raised his concern over the regulatory gap in the crypto commodity spot market:
“There have been a few targeted efforts, but overall, the digital asset market has continued to integrate into traditional financial institutions without comprehensive regulatory guardrails. Concerns regarding customer protections, increasing instances of fraud and market abuse, broader market resiliency, and even financial stability are intensifying in the absence of federal legislation. We’ve seen this before in our history where we leave large swaths of finance outside of oversight and responsibility, and we have seen time and time again that it ends badly.
American investors, small and large, have demonstrated eagerness to incorporate digital asset products into their portfolios. It is our duty to ensure that when they do so, the full protections afforded by our regulatory oversight are in place, and that illegal and illicit conduct is swiftly addressed.”
Trivia
Last Week's A: President John Adams was the first president to host a New Year's reception at the White House in 1801.
This Week's Q: Which President gave the longest inaugural address speech? Hint: He also had the shortest presidency.
Thanks for reading.
-GSL