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It is unlikely the US Congress will pass significant crypto-related legislation soon in order to foil the SEC’s path of killing that industry.
As I wrote last week, 81 crypto-related Bills have been proposed so far, but none have yet to pass. One of the most hopeful Bills pertaining to Stablecoins had to be re-written as the previous one died on the vine. Another “comprehensive” Bill is being promised by Rep. McHenry as a joint effort from the House Financial Services Committee and the Agriculture Panel.
The SEC has momentum, and they can move much faster than Congress, sadly. The only way to make headways is to throw the SEC a curveball, distract them, think out of the box, do something different, or wait for an unexpected event to change the variables.
Some candidate ideas could have a faster gestation period than passing a Bill.
Statutorily, the SEC’s Chair reports to the US Congress. Rep. Warren Davidson is preparing a Bill he will introduce in May that might limit the powers of the Chair, and give the Commissioners more voice.
There are two interrelated parts to Coinbase’s situation. First, the much-publicized Wells Notice and their response to it. Second, is their filing of a “narrow action” asking the SEC to answer their 2022 petition. The silver lining in this situation is something called “The Major Questions Doctrine” as it might be used to argue that digital assets are not within the SEC scope, and that Congress should give that mandate.
It can go either way, and the type of outcome will determine how significant this might be for the industry.
In the absence of federal agencies' leadership, several states are enacting legislation touching pieces of the blockchain industry. Although this patchwork of local regulation may or may not be congruent with the national strategy, it’s possible that one such Law might tip the attention and create a new sense of urgency. Notable mentions are California’s DAO Bill, Texas’ Mining Bill, Florida’s proposal to ban CBDCs, Wyoming’s Bill on private crypto keys, etc. Regardless, this underscores the mess this is creating.
The SEC’s arrogance was asserted when they either sued or fined the top four US actors, Ripple (XRP), Coinbase, Kraken, and Gemini. It’s possible that something starts to crumble under Gensler's dictatorial and domineering style of leadership.
Although major US banks have been absent from any crypto cheerleading, that can change on a dime. These banks are under pressure to become more open-minded about the inevitability of the blockchain and cryptocurrencies. If one of them makes a bold move, others will be fast followers.
The trial is set for October, but it could get delayed, or we might see a speedy outcome. There hasn’t been a shortage of unexpected twists and turns, and that will probably continue as more layers of the onion get peeled.
Many are sounding the alarm bell on the continuing weakness of the US dollar versus other world currencies, some of which are competing to replace its supremacy. Then you need to compound the US Fed’s insatiable appetite to print more USD, and the theory that cryptocurrency is a good alternative hedge against the devaluation of the dollar. The chart to keep an eye on is the US Dollar Index (DXY), which has been on the decline, dropping from 110.88 in November 2022 to 101.61 in early May 2023.
Midterm elections could flip the Senate toward a Republican majority which might embolden the US House to act more aggressively pertaining to cryptocurrency.
Of course, the probabilities are low for some of these scenarios, but everything is possible. We need a breakthrough because the current path for change is very slow.
And breakthroughs often come as a result of unexpected surprises.
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