April 27: This week in crypto federal policy
DC Decentralized: A weekly newsletter on digital asset and blockchain federal policy
This week decoded
Sen. Thom Tillis (R-NC) reportedly told Senate Banking Committee Chair Tim Scott (R-SC) the committee should hold off on advancing market structure legislation until at least May, citing unresolved disagreements in bipartisan negotiations he has been leading with Sen. Angela Alsobrooks (D-MD). The latest sticking point: bank opposition to a mid-April draft compromise on stablecoin yield.
House Ways and Means Chair Jason Smith (R-MO) says his crypto tax bill is nearing completion, with timing dependent on bipartisan support.
U.S. Indo-Pacific Commander Admiral Samuel Paparo made headlines this week when he testified that INDOPACOM operates an active node on the Bitcoin network, the first public confirmation that a U.S. combatant command is directly participating in the Bitcoin peer-to-peer network. Paparo was careful to frame the effort in non-financial terms, describing Bitcoin not as a reserve asset but as a computer science tool, with military applications in cryptography, immutable ledger technology, and proof-of-work protocols for securing networks.
Read more below
Congress
Hearings
Last week
On April 21, the House Homeland Security Subcommittees on Cybersecurity and Infrastructure Protection and Border Security and Enforcement held a hearing on “Online Scams, Crypto Fraud, and Digital Extortion: An Examination of How Transnational Criminal Networks Target Americans.”
On April 22, the House Small Business Subcommittee on Innovation, Entrepreneurship, and Workforce Development held a hearing on “Main Street Meets Crypto: What Digital Assets Mean for Small Businesses.”
On April 22, the House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions held a hearing on “Evaluating the Effectiveness of U.S. Sanctions Programs.”
This week
On April 29, the House Financial Services Task Force on Monetary Policy, Treasury Market Resilience, and Economic Prosperity Subcommittee hearing on “Examining Derivatives’ Role in the Treasury Market.”
Upcoming
On May 19, the House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions holds a hearing on “Modernizing the BSA for Financial Crime in the 21st Century”
On May 20, the House Financial Services Digital Assets, Financial Technology, and Artificial Intelligence Subcommittee holds a hearing on “Partnering for Innovation: How Bank-Fintech Collaborations Enhance Financial Infrastructure.”
Legislation
Reps. Sam Liccardo (D-CA) and Young Kim (R-CA) introduced the Payments Access and Consumer Efficiency (PACE) Act to streamline federal registration for qualified payment companies, protect consumer funds, and provide direct access certain federal payment systems. (Text)
Correspondence
Sen. Richard Blumenthal (D-CT) sent a letter to Commodity Futures Trading Commission (CFTC) Chair Michael Selig requesting information about disputed outcomes of prediction market bets and concerns that prediction markets’ mechanisms for resolving controversial bets are insufficient. (Letter)
Sens. Elizabeth Warren (D-MA) and Chris Van Hollen (D-MD) sent a letter to Securities and Exchange Commission (SEC) Chair Paul Atkins expressing concern that recent interpretive guidance “Application of the Federal Securities Laws to Certain Types of Crypto Assets and Certain Transactions Involving Crypto Assets” takes the view that broad swaths of the crypto market are exempt from securities laws. (Punchbowl)
Publications and Events
The Congressional Research Service (CRS) published a report on Cryptocurrency Mining and the Electricity Sector. (Report)
Noteworthy Quotes and Events
ADMINISTRATION
White House
President’s Council of Advisors for Digital Assets Executive Director Patrick Witt posted “What are the odds the anonymous sources cited in this article have deep ties to China? Because if the US fails to lead on crypto by passing a comprehensive regulatory framework, the prime beneficiary will be the CCP.”
President Donald Trump said, “We want to beat China at the industry. We’re leading with crypto, we’re leading with AI, and I really feel I have an obligation... as a President, I have to be able to make sure that all of our industries do well. Crypto’s a big industry.”
Treasury Department
On Treasury’s budget request to Congress, Secretary Scott Bessent testified, “Treasury’s Office of Terrorism and Financial Intelligence is at the forefront of America’s fight against foreign adversaries, and the additional funding would expand Treasury’s ability to trace, detect, and sanction financial networks acting in bad faith. The request also includes a small investment to advance institutional expertise in digital assets, housing finance, and global financial markets within Treasury’s Departmental Offices. This is particularly important for the implementation of the GENIUS Act, landmark legislation that created the first-ever regulatory framework for stablecoins.” (Statement)
Securities and Exchange Commission (SEC)
Chair Paul Atkins posted “One year ago, I was sworn in as SEC Chairman. Since then, we’ve put forth a strategy to advance modern frameworks, clarify jurisdictional lines, & transform our rulebook. One year ago, I declared that it’s a new day at the SEC. I meant it then. And I can speak to it now. Our efforts to ADVANCE modern frameworks include: Setting the foundation for making America the crypto capital of the world, Upholding market integrity and protecting American investors, Modernizing capital markets regulation. Our efforts to CLARIFY jurisdictional lines include: Ending decades-long turf wars between the CFTC and SEC, Scaling Project Crypto. Our efforts to TRANSFORM our rulebook include: Working to Make IPOs Great Again and return to materiality, Ending regulation by enforcement to pursue matters of real investor protection. By rejecting the institutional drift that the previous admin had normalized, we are recalibrating the agency in line with its statutory mission. But our work is far from over. An aggressive rulemaking agenda in the coming year will build on the work that we have begun. Our capital markets must continue to reflect our national character, leading the world in their capacity to translate ingenuity into prosperity. That is the promise our markets have long represented. In this new era at the SEC, that is the promise they will continue to keep.”
CONGRESS
Market Structure
Sen. Ruben Gallego (D-AZ) said, “There is no final bill — there is no final movement — unless there is a bipartisan agreement when it comes to the ethics provision.” (Politico)
Sen. Adam Schiff (D-CA) said, “We’re making progress. We have been talking for a long time without making much progress, and now that other parts of the bill are starting to come together, we’re narrowing our differences.” (Politico)
Sen. Thom Tillis (R-NC) said, “There has to be ethics language in the bill before it leaves the Senate, or I’ll go from one of the people working on negotiating it to voting against it.” (Politico)
On postponing a markup until May, Tillis said, “It’s very important to me not to accelerate things, to hear everybody and give them a rational basis for what we do accept and what we don’t accept.” (Punchbowl)
Sen. Bernie Moreno (R-OH) said, “I really think we’re gonna get it done… [but] the schedule’s not with us really after May.” (Punchbowl)
On Tillis’s proposed timeline, Moreno said, “He operates in a lower gear than me, in terms of — he’ll say he’s dramatically more patient than I am.” (Punchbowl)
On the Senate’s ongoing efforts to reach agreement, Rep. Mike Lawler (R-NY) said, “The fact is, all of their machinations, frankly, have just been a waste of time. They need to land the plane here. (Punchbowl)
Miscellaneous
On his committee’s developing digital asset tax draft, House Ways and Means Chair Jason Smith (R-MO) said, “We’ve been putting in months of work. We’re at the 1-yard line… I want it to be bipartisan and so we’re still having conversations with the other side. I’m ready to go now, but I want to be sure we get everyone on the same page.” (Punchbowl)
On his upcoming legislation banning members of Congress from prediction markets, Sen. Bernie Moreno (R-OH) said, “Just take the whole thing out of it. And by the way, you should be decently busy that you don’t have time to go on Kalshi and make bets.” (Punchbowl)
On prediction market regulation, House Financial Services Chair French Hill (R-AR) said, “We are asking the questions of the regulatory agencies and stakeholders about — is there a need for any imminent statutory change?” (Punchbowl)
Sen. Cynthia Lummis (R-WY) posted “Boundless possibilities. I’m incredibly impressed by Adm. Paparo’s foresight & use of Bitcoin for natl security. We’re watching digital assets integrate into global power infrastructure. It’s time we welcome them back on our soil. Pass the Clarity Act, secure America’s future.”
Lummis also posted “Digital assets are being woven into the fabric of America’s financial system. I look forward to a Federal Reserve chair who not only understands that, but embraces it.”
Sen. Elizabeth Warren (D-MA) posted “The Trump Administration is pushing private equity, private credit, and crypto into retirement accounts. Wall Street wants to dump its risky assets in your 401k – putting your retirement at risk.”
House Armed Services Committee Hearing on “U.S. Military Posture and National Security Challenges in the Indo-Pacific Region” Q&A
Rep. Lance Gooden (R-TX)
Rep. Lance Gooden (R-TX): “Admiral Paparo, yesterday you testified that Bitcoin held potential as a tool for national security. Recent research from the Bitcoin Policy Institute estimates China has approximately 194,000 Bitcoins, while the United States has approximately 328,000 Bitcoins. In this era of digital competition, would it be to our strategic advantage to maintain a lead in this regard as we do with other strategic resources like gold and oil?”
U.S. Indo-Pacific Commander Admiral Samuel Paparo: “Sir, our interest in Bitcoin is as a tool of cryptography, a blockchain, and reusable proof of work as an additional tool to secure networks and project power. And so, I think this protocol is here to stay. I think the computer science of it has direct implications for the projection of power—not financial, but from a computer science standpoint—from the securing of networks. And so, I am supportive of those applications. All instruments of national power are important, but from the military application standpoint, my interest in Bitcoin is as a computer science tool as a projection of power.”
Gooden: “I appreciate that. I agree with you, and I’d also like to hear your thoughts on monetary competition over the coming decades. What role does Bitcoin play in spreading digital property rights?”
Paparo: “Well, you know, people use Bitcoin today, right now, to protect their own digital property, and that’s the reusable proof-of-work protocol that’s combined with blockchain for accountability and cryptography for security. And so, that’s the role that I see for it. I see direct national security implications, and then I’m supportive of anything that maintains our own dollar dominance worldwide.”
Gooden: “I appreciate that. Do you think we’re adequately prepared to counter China’s strategic direction regarding digital assets?”
Paparo: “I think that our recent act with the GENIUS Act is a great step forward that moves us in that direction.”
Gooden: “Lastly, I’ll ask you as we continue to craft the NDAA, what authorities and resources does INDOPACOM need to address in respect to the national security dimensions of digital assets?”
Paparo: “Presently, we’re in experimentation, so I’ll give you a deeper look into that. Presently, we have a node on the Bitcoin network right now. We’re not mining Bitcoin. We’re using it to monitor, and we’re doing a number of operational tests to secure and protect networks using the Bitcoin protocol.” (Press release)
Senate Banking, Housing and Urban Affairs Committee Hearing on the Nomination of Kevin Warsh to be a Member and Chairman Designate of the Federal Reserve Board of Governors Q&A
Chair Tim Scott (R-SC)
Chair Tim Scott (R-SC): “I think it’s really important for us to dig into that issue as well digital assets. The future of finance in the world seems to have a major component of it, being artificial, being digital assets, the market structure, legislation. We don’t want your comment on but the important role of the blockchain in the future is another really important part of the future of our economy.”
Sen. Jim Banks (R-IN)
Sen. Jim Banks (R-IN): “You wrote in an op ed in 2021 and the Wall Street Journal that I recommend everyone reads, it’s one of the reasons that I wholeheartedly support you, because of what you it says a lot about you in this op ed, but you, you talked about how the PRC is actively promoting its digital Yuan currency with the explicit goal of creating an alternative payment system that side steps US sanctions. You’ve been very clear that China is not playing by the rules. China is buying over 80% of Iran sanctioned oil in Chinese currency through Chinese banks, completely outside swift the Iranian government says it is charging ships to transit the Strait of Hormuz and collects payments via crypto and Chinese currency. What tools does the Federal Reserve have to defend the dollars role as countries route payments through the Chinese financial systems to do business with Iran and other adversaries?”
Kevin Warsh: “As we talked about before, monetary policy is independent. But outside of monetary policy, the Federal Reserve can be working hand in hand with the rest of the government. The Federal Reserve is independent inside of government, not independent of government. What the US can do with respect to the dollar is have a more robust payment system. The Fed has a number of payment systems that most financial participants in the world use. I would say they all are in need of substantial reform. There’s a system called Fed now, which some describe as Fed yesterday. There’s a series of new technologies that the Fed needs to oversee and needs to architect so that the payment system in the US is the safest, most efficient, most capable in the world. Otherwise, we’ll be losing, losing to adversaries around the world in being the lynchpin of the global economy.”
Sen. Bernie Moreno (R-OH)
Sen. Bernie Moreno (R-OH): “Let’s move on to Central Bank digital currencies. Do you agree that the Federal Reserve has no legal right to issue a central bank digital currency?”
Kevin Warsh: “Senator, I agree that they don’t have the right, and I think it would be a bad policy choice.”
Moreno: “Somebody just put an exclamation mark on that. Under your chairmanship of the Federal Reserve, you will not have the Federal Reserve explore any way move towards a central bank digital currency if it’s within.”
Warsh: “The power of the Chairman of the Federal Reserve. I agree with that statement, perfect.”
Sen. Cynthia Lummis (R-WY)
Sen. Cynthia Lummis (R-WY): “Yes or no. Do you believe that digital assets should be incorporated into our financial industry so Americans have new investment opportunities and consumer protections.”
Kevin Warsh: “Senator, digital assets are already part of the fabric of our financial services industry in the United States.”
What I’m Reading This Week
A Bitcoin Evangelist Tries to Convert Me, Ross Douthat, The New York Times.
My Quest to Solve Bitcoin’s Great Mystery, John Carreyrou, The New York Times.
About Zero One Strategies
Zero One Strategies is a specialized government relations practice dedicated to navigating the complex landscape of U.S. federal policy in emerging technologies. As advancements in technology continue to outpace regulatory frameworks, Zero One Strategies aims to provide strategic guidance and bipartisan advocacy for innovators and businesses operating at the forefront of technological development.
The practice focuses on key areas such as artificial intelligence, digital assets, blockchain, decentralized technologies, cybersecurity, data, and digital infrastructure, as well as the multiple policy issues impacting these sectors, including tax and financial services.
Contact us at Stacey@ZeroOneStrategies.com
