December 19: This week in digital asset federal policy

DC Decentralized: A weekly newsletter on developments in blockchain and digital asset federal policy

This week decoded

This week in digital asset federal policy, the path forward for the Senate Banking Committee market structure bill is unclear in the aftermath of last week’s turmoil. Committee Chair Tim Scott (R-SC) postponed the scheduled markup and vote on the Digital Asset Market Clarity Act after late-stage backlash led by Coinbase CEO Brian Armstrong’s public withdrawal of support. A raft of amendments to the heavily negotiated text, notably bipartisan amendments from Sens. Thom Tillis (R-NC) and Angela Alsobrooks (D-MD) to further restrict stablecoin rewards, emerged as key flashpoints for industry and some lawmakers. Scott pledged further negotiations to revise the draft and build bipartisan and industry backing before any future markup is set.

At the same time, the Senate Agriculture Committee has moved ahead on its own digital asset market structure proposal, scheduling a markup for next week, with legislative text expected to be released on January 21 amid ongoing bipartisan talks.

In the Administration, the CFTC is seeking nominations for their Innovation Advisory Committee.

Read more below

Congress

Hearings

Last week

• On January 13, the House Ways and Means Trade Subcommittee held a hearing on Maintaining American Innovation and Technology Leadership.

• On January 13, the House Financial Services Digital Assets, Financial Technology, and Artificial Intelligence Subcommittee held a hearing on Delivering for American Consumers: A Review of FinTech Innovations and Regulations.

This week

• On January 21, the House Small Business Rural Development, Energy, and Supply Chains Subcommittee holds a hearing on Empowering Rural America Through Investment in Innovation.

Upcoming

• On January 27, the Senate Agriculture, Nutrition and Forestry Committee holds a markup of crypto market structure legislation.

Legislation

• Senate Banking Committee Chair Tim Scott (R-SC) released a manager’s amendment ahead of the expected markup of market structure legislation. (Text)

• Sens. Cynthia Lummis (R-WY) and Ron Wyden (D-OR) introduced the Blockchain Regulatory Certainty Act (BRCA) to clarify that software developers and infrastructure providers who do not control user funds are not money transmitters under federal law. The BRCA was included in the Senate Banking market structure legislative text. (Text)

Correspondence

• Senate Judiciary Committee Chair Chuck Grassley (R-IA) and Ranking Member Dick Durbin (D-IL) sent a letter to Senate Banking Chair Tim Scott (R-SC) and Ranking Member Elizabeth Warren (D-MA) expressing concern with changes to Section 1960 in market structure legislative text, saying, “Section 604 of the legislation weakens 18 U.S.C. § 1960, a federal criminal code provision prohibiting unlicensed money transmitting businesses (MTB), by providing a sweeping exemption to non-controlling developers or providers from critical portions of Titles 18 and 31. The Senate Judiciary Committee—which has jurisdiction over Title 18—was not consulted or given the opportunity to meaningfully review the proposed changes in advance.” A Banking Committee spokesperson responded that the same language is included in the Blockchain Regulatory Certainty Act (BRCA), which the Parliamentarian ruled is entirely within the jurisdiction of the Banking Committee. (Letter via PoliticoPro)

• Sen. Elizabeth Warren (D-MA) sent a letter to Comptroller of the Currency Jonathan Gould requesting the OCC delay review of World Liberty Financial’s bank-charter application “until President Trump divests from WLF and eliminates all financial conflicts of interest involving himself or his family and the company.” (Letter)

• Warren also sent a letter to Securities and Exchange Commission Chair Paul Atkins requesting information about how the agency will protect investors following President Trump’s Executive Order allowing pension funds and retirement accounts to hold cryptocurrency assets. (Letter)

• House Financial Services Ranking Member Maxine Waters (D-CA), and Reps. Sean Casten (D-IL) and Brad Sherman (D-CA) sent a letter to SEC Chair Paul Atkins expressing concern with “the SEC’s significant pullback from its responsibility to investigate and pursue enforcement actions involving crypto assets” and encouraging the SEC to pursue an enforcement action against Tron Foundation founder. (Letter)

Publications

• The Senate Banking Committee published fact sheets on the CLARITY Act market structure legislation. (Fact sheet)(Myth vs. Fact)

• Sen. Richard Blumenthal (D-CT) published an op-ed in FOX News expressing his concerns about the potential negative impact of crypto market legislation on the U.S. financial system, saying, “In racing to finish the crypto industry’s wish list before midterms, Congress should remember what happened the last time crypto impacted legacy banking… Silicon Valley Bank, Signature Bank and First Republic Bank raked in profits when venture capital and crypto boomed, but they all learned that tech money comes fast but leaves even faster — threatening the stability of banking and leaving taxpayers and investors on the hook for losses. These bank failures provide a chilling warning for anyone backing the crypto lobby’s efforts to further cement the unsavory world of crypto into the American economy… Unless Congress acts to put some guardrails on the recently passed GENIUS Act, it will only be a matter of time before the industry is clamoring for bailouts again.” (Op-ed)

Trump Administration

Commodity Futures Trading Commission (CFTC)

• The CFTC launched a rebranded Innovation Advisory Committee, formerly the Technology Advisory Committee, to provide expertise and recommendations on innovation in financial markets. The CEO Innovation Council participants will be charter members. Nominations for additional IAC members are due by January 31. (Press release)

Noteworthy Quotes and Events

ADMINISTRATION

White House

• White House AI & Crypto Czar David Sacks posted “Passage of market structure legislation remains as close as it’s ever been. The crypto industry should use this pause to resolve any remaining differences. Now is the time to set the rules of the road and secure the future of this industry. The White House remains committed to working with Chairman Scott, members of the Senate Banking Committee, and industry stakeholders to pass bipartisan crypto market structure legislation as soon as possible.”

• Executive Director of the President’s Council of Advisors for Digital Assets Patrick Witt posted “For crypto and tradfi stakeholders alike, remember that for every one issue in the market structure draft giving you heartburn, you’re getting several pieces of candy. That’s how this works. Zoom out, maintain perspective.”

• Witt also posted “Lost in yesterday’s disappointing postponement news is the fact that Senate Banking Democrats were prepared to vote unanimously against a bipartisan bill that included so many concessions to them that it ultimately cost industry support. Bad faith.”

• Witt also posted “UPDATE: we have received confirmation from DOJ that the digital assets forfeited by Samourai Wallet have not been liquidated and will not be liquidated, per EO 14233. They will remain on the USG balance sheet as part of the SBR.”

Federal Reserve

• In remarks on the Outlook for the Economy and Monetary Policy, Vice Chair for Supervision Michelle Bowman said, “Since the President appointed me as Vice Chair for Supervision last June, we have made meaningful progress on several priorities that will improve transparency, efficiency, and focus within our supervisory and regulatory framework. My objective is to ensure that supervision and regulation are appropriately tailored, risk focused, and grounded in our statutory responsibilities. Congress has also taken several steps in this regard. The passage of the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act), along with ongoing consideration of banking and other digital assets legislation, underscores the importance of regulatory clarity as innovation enables the banking and financial systems to continue to evolve. We are actively working to implement the Federal Reserve’s responsibilities under this new law.” (Remarks)

CONGRESS

Senate Banking Committee Markup Pause

• Senate Banking Chair Tim Scott (R-SC) posted “I’ve spoken with leaders across the crypto industry, the financial sector, and my Democratic and Republican colleagues, and everyone remains at the table working in good faith. As we take a brief pause before moving to a markup, this market structure bill reflects months of serious bipartisan negotiations and real input from innovators, investors, and law enforcement. The goal is to deliver clear rules of the road that protect consumers, strengthen our national security, and ensure the future of finance is built in the United States.”

• Sen. Cynthia Lummis (R-WY) posted “Thanks to Chairman Scott’s leadership, we are closer than ever to giving the digital asset industry the clarity it deserves. Everyone is still at the negotiating table, & I look forward to partnering with him to deliver a bipartisan bill the industry— & America— can be proud of.”

• Lummis also posted “We have spent thousands of hours working in good faith to deliver a bill that offers the digital asset industry the clarity it needs to thrive on U.S. soil and solidify America’s leadership in financial innovation for generations to come. Today’s response from some in the industry proves they just are not ready, and while I am deeply disappointed, I am committed to taking this feedback and partnering with the industry to deliver a product that helps them thrive. When Senator Gillibrand and I started this mission to create a clear and commonsense framework for digital assets more than four years ago, our goal was to protect consumers and ensure digital asset innovation happens here on U.S. soil, and that mission has not changed. Everyone is still at the negotiating table and I’m incredibly grateful to Chairman Scott for his tireless efforts and continued commitment to finding common ground.”

• Lummis said, “It’s going to take a while to develop a plan on how to make another run at it. I’m not going to reach out to do it immediately. People need a chance to soak in what happened.” (Politico)

• Lummis also said, “I feel like I got run over by a Mack truck. We’ll pick up the discussion in February in some manner. But I don’t know when, and I don’t exactly know how.” (Punchbowl)

• Lummis also said, “‘It wasn’t just the Coinbase comments on Twitter. As I continued to visit with members last night, it just sounded like there was too much reticence about going forward today. They just weren’t ready.’” (Punchbowl)

• The night before the markup, regarding his amendment with Sen. Angela Alsobrooks (D-MD) to further limit stablecoin yields, Sen. Thom Tillis (R-NC) said, “I’ve let my chair know I’m going to move forward with the amendment, and I think it’ll get bipartisan support.” (Punchbowl)

• After the markup was paused, Tillis said, “I want a solution here. I do not want us to fail, because this is the future of our banking system… Part of what we need to do is really get some principles in the room and have executive level discussion on some of these issues. I believe that will probably get us closer to a consensus than anything.” (Punchbowl)

• Tillis also said he is “optimistic we’ll have a successful markup this quarter.” (Politico)

• Sen. Mark Warner (D-VA) said, “I think there is a way forward.” (Politico)

• Warner also said, “We have been working really in good faith. But we’ve still got issues to close out. We gotta find a way to link arms.” (Punchbowl)

• Warner also said the crypto industry has gotten “fairly used to virtually getting everything they want.” (Punchbowl)

• Sen. John Barrasso (R-WY) posted “Chairman Scott’s mission is to keep America the global financial leader. The innovative crypto industry is one key part of our continued dominance now and in the future. Tim is effectively working with all stakeholders to set new guidelines that boost investment in the United States and protect consumers. I am confident he will succeed.”

• Sen. Bill Hagerty (R-TN) posted “I applaud Chairman SenatorTimScott for his leadership, as well as SenLummis and the White House, for working day and night with all the members of the Banking Committee on the crypto market structure legislation. I am confident we will get to a consensus product in short order. It took hard work and dedication to get the GENIUS Act across the finish line last year, and this is no different. Because of GENIUS, America will become the crypto capital of the world, and what we produce on market structure will significantly improve the United States’ posture. I am fully committed to continuing this important work with my colleagues on market structure and look forward to passing legislation that ensures this innovative technology flourishes in the United States for decades to come.”

• Sen. Pete Ricketts (R-NE) posted “Getting the policy right is more important than getting it done fast. But the goal remains the same: making sure the digital asset market is both innovative and predictable.”

• Sen. John Kennedy (R-LA) said, “We should have released the bill and the amendments and given senators, and more importantly, the American people, a chance to digest it, then hold a long hearing to get feedback. That was my request, but it was declined, and that was Timmy’s right to do it the way he wants to. He is the chairman.” (Punchbowl)

• Sen. Dave McCormick (R-PA) posted “Earlier this week I had a productive discussion with PA's community bankers in Juniata County. We must strike the right balance — embrace and accelerate crypto innovation while ensuring banks can compete fairly and the banking system remains strong.”

• Rep. Haley Stevens (D-MI) posted “This week, I have been closely following the important debate in the Senate about the future of digital asset market structure. I cosponsored and voted to pass the Clarity Act in the House because American innovators deserve regulatory certainty. Clear rules of the road will unlock increased access to banking and credit for all communities, and enhance American security as the next generation of global financial infrastructure is built. I am glad to see reports that all parties remain at the table, and I encourage my Senate colleagues to keep working together to get this critical bipartisan legislation across the finish line.”

Senate Agriculture Markup

• In releasing the schedule for upcoming committee consideration of their market structure legislation, Senate Agriculture Chair John Boozman (R-AR) said, “This schedule ensures transparency and allows for thorough review as the committee moves forward with legislation to provide clarity and certainty for crypto markets. I’m grateful to Senator Booker, who continues to be a great partner, as well as our to staff for their hard work and dedication to create new rules to protect consumers while also supporting American innovation.”

• In response to the breakdown in momentum in the Senate Banking Committee, Sen. Cory Booker (D-NJ) said “the negotiations are ongoing.” (Punchbowl)

• Sen. Andy Kim (D-NJ) said, “Let’s just say my concerns have not been addressed.” (Punchbowl)

Miscellaneous

• Sen. Richard Blumenthal (D-CT) posted “In racing to finish the crypto industry’s wish list, Congress should remember the lesson of Silicon Valley Bank—tech money comes fast but disappears even faster, leaving taxpayers & investors on the hook for bailouts & losses.”

• Rep. Buddy Carter (R-GA) posted “When it comes to crypto, one thing is for sure: we need to get the framework legislation right the first time. We made HUGE steps with the Genius Act. Let’s keep that momentum going with the Clarity Act.”

• Sen. Cynthia Lummis (R-WY) posted “Developers who can’t touch, move, or control your crypto shouldn’t be regulated like they can. That’s not controversial, it’s just common sense. Proud to work with RonWyden to bring sanity to digital asset regulation while keeping every AML protection in place.”

• Lummis also posted “The digital asset industry can’t wait any longer for regulatory clarity. This bipartisan Clarity Act provides the framework America needs to lead in financial innovation while protecting consumers. Both parties contributed to every section. Let’s get this done!”

• Lummis also posted “After months of hard work, we have bipartisan text ready for Thursday’s markup. I urge my Democrat colleagues: don’t retreat from our progress. The Digital Asset Market Clarity Act will provide the clarity needed to keep innovation in the U.S. & protect consumers. Let’s do this!”

• Rep. Warren Davidson (R-OH) posted “The future of money will determine the future. Either we stop CBDC & digital ID while protecting self-custody and the fundamental right to transact or western civilization is effectively lost.”

• Financial Services GOP posted “Chairman RepFrenchHill: ‘I’m really looking forward to the Senate’s market structure markup tomorrow and I hope this means that we’re moving closer toward having a law that President Trump can sign, which is one of his commitments to have both stablecoin and market structure bills signed into law.’”

• Financial Services GOP also posted “WATCH: Chairman RepFrenchHill to OANN on Committee Republican staff debanking report: ‘Debanking is not new. Obama and Biden are two sides of the same coin, and I believe every legal business that’s following the laws of the state following the federal laws should have the opportunity to find financial services. Our investigation by last Congress and in this Congress found that they were systematically debanked because these prior administrations did not favor digital asset businesses - they would stop its access to the banking industry, and that contributed to many losses during the four years of Biden like financial losses.’”

• Financial Services GOP also posted “WATCH: Chairman RepFrenchHill to OANN on debanking: ‘If you can debank the President of United States, who else can you debank? As someone who’s been in finance essentially my whole career, I can’t stand the lack of transparency and the lack of fairness in that…. Debanking, to me, is when the government goes to that little bank and says, you may not do any business with anyone involved in this industry. Well, why? Well, we don’t like that industry.’”

• Sen. Elizabeth Warren (D-MA) posted “SenBlumenthal is right. As the Senate continues to debate a crypto market structure bill, we must make sure it protect investors, our financial system, and American taxpayers.”

What I’m Reading This Week

• Perpetual Futures Contracts on Cryptoassets, Lee A. Sheppard, Tax Notes.

• Navigating the quantum computing threat landscape for blockchains: A comprehensive survey, Hassan Khodaiemehr, Khadijeh Bagheri, Chen Feng, Computer Science Review.

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.

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