One way or another, the US crypto industry is likely to receive official policy defining which digital assets get which treatment from which federal agencies. The problem: It might not last.
The chairman of the Securities and Exchange Commission, Paul Atkins, is focused on reversing the “head in the sand” approach he accuses his predecessors of having on cryptopolitics, and he is ready to issue rules that give the industry the regulatory clarity it craves. The catch, however, is that such rules will not be locked in and can be deleted by the same kind of commission vote that puts them in place. They will not be backed by a targeted law that makes them unassailable by future administrations.
“We need a solid foundation in the statutes so we can have no backsliding in the future,” Atkins told the Senate Banking Committee in Thursday’s testimony. However enthusiastic he is in giving industry innovation-friendly regulations, they are not “future-proof”.
But legislation in the US Senate that would regulate such things is languishing. Crypto executives and bankers have been unable to reach a compromise on one of the sticking points in stablecoin reward programs. And Democratic lawmakers have not been offered answers to a number of their core concerns, including the full staffing of regulatory commissions and the danger of conflicts of interest when high-ranking officials have deep business ties to crypto (most obviously, in their view, President Donald Trump).
Senator Mark Warner, one of the lead Democratic negotiators on the Digital Asset Market Clarity Act, which still needs a banking panel hearing, said there is still a large, bipartisan group working hard on the bill.
“We want to get this done,” he said, signaling that Democrats have not yet given up on negotiations. “It must be done safely.”
His primary concern is decentralized finance (DeFi) and preventing bad actors from using it for illegal purposes. Warner’s views on this have at times shaken the industry and have been seen as a threat to the future existence of DeFi projects. But recent negotiations on the bill’s treatment of illegal financing have yet to settle on an approach.
“We need to make sure we don’t create a regime that allows bad actors or isolates enforcement,” Warner said.
One Republican lawmaker, Sen. Bernie Moreno, was friendly with the SEC chairman, saying, “Congress has failed miserably in giving you laws.”
Atkins reiterated that his agency has “pretty broad authority” to write rules now that put crypto companies on a clear regulatory footing, which he has tried to do with his “Project Crypto” agenda. But he said the rules had to have legislation “supporting” them.
“We need, I think, a good law coming out of Congress,” Atkins said.
Read more: The big US crypto bill is coming. Here’s what that means for everyday users
So far, a similar version of the Clarity Act has already been passed in the House of Representatives last year. And just last month, another version cleared the Senate Agriculture Committee on a party line vote. But when it comes time for the full Senate to vote on a final market structure bill, the industry will need at least seven Democrats like Warner on board — and potentially more if Republicans disagree.
While Senate Banking Committee Chairman Tim Scott sounded a hopeful note Thursday about the Clarity Act, even industry leaders like Coinbase CEO Brian Armstrong have shown a willingness to pull support if the policy doesn’t look right. And Treasury Secretary Scott Bessent called the crypto industry “nihilists” ready to stand in the way, saying they should move to El Salvador if they don’t want heavy regulation.
The bond Atkins needs for the SEC’s pending rules remains uncertain, though the White House has asked negotiators to find common ground before the month is out. The clock is ticking, as House Financial Services Committee Chairman French Hill put it.
Read more: SEC’s Paul Atkins Grilled on Pulling Back Crypto Enforcement, Including With Justin Sun, Tron
