June 29: This week in crypto federal policy
DC Decentralized: A weekly newsletter on developments in digital assets and blockchain federal policy
This week decoded
On Capitol Hill, multiple House committees considered digital assets, sparring over whether crypto rails strengthen or siphon deposits from the traditional banking system, while also casting digital assets as both a tool against authoritarian regimes and an opportunity for global standard-setting leadership… all to a building drumbeat around the CLARITY Act. Across the Capitol, Senate Majority Leader John Thune is reportedly prepared to bring the market structure bill to the floor for a vote in the coming weeks, regardless of the status of protracted negotiations.
On the regulatory side, eight financial agencies finalized a joint rule on interoperable data standards and the OCC published a proposed amendment GENIUS Act-related AML and sanctions rulemaking. In digital asset tax, the IRS is finalizing new voluntary disclosure guidance for digital assets to allow taxpayers to report violations and mitigate penalties and the National Taxpayer Advocate flagged digital asset tax compliance as a 2027 priority.
Read more below
Congress
Hearings
Last week
On June 24, the House Financial Services Committee held a hearing on “Future of Payments: Promoting Innovation and Fair Markets.”
On June 25, the House Financial Services Subcommittee on Capital Markets held a hearing on “From Wall Street to Main Street: The Future of How America Invests.”
On June 25, the House Small Business Committee held a hearing on “From Startup to Scale: The Role of the SBA Office of Investment and Innovation in Powering America’s Small Businesses.”
On June 25, the House Select Strategic Competition Between the United States and the Chinese Communist Party Committee held a hearing on “China’s Economic Espionage and Subnational Influence in the United States.”
Upcoming
On July 17, the House Financial Services Subcommittee on Digital Assets, Financial Technology, and Artificial Intelligence holds a field hearing on “Building the Future of Finance: How the CLARITY Act Unlocks Innovation.”
On July 21, the House Small Business Subcommittee on Innovation, Entrepreneurship, and Workforce Development holds a hearing on “Main Street Meets Crypto: What Digital Assets Mean for Small Businesses”
On July 21, the House Financial Services Subcommittee on National Security, Illicit Finance, and International Financial Institutions holds a hearing on “Oversight of the Financial Crimes Enforcement Network”
Legislation
Sen. Jon Ossoff (D-GA) introduced a Senate Resolution to prohibit Senators from buying or selling stocks and cryptocurrency. (Text)
Correspondence
Sens. John Curtis (R-UT) and Adam Schiff (D-CA) sent a letter to Commodity Futures Trading Commission (CFTC) Chair Michael Selig requesting answers following recent reports that prediction market operator Polymarket used deceptive marketing tactics to promote gambling-style products to U.S. audiences. (Letter)
Publications and Events
Minority Staff of the Senate Banking, Housing, and Urban Affairs Committee released a report detailing how officials and entities affiliated with the United Arab Emirates (UAE) made investments in World Liberty Financial (WLF) and how the Trump Administration subsequently took policy actions benefiting the UAE. (Report)
Trump Administration
Banking Regulators
The Securities and Exchange Commission, Department of Treasury, Consumer Financial Protection Bureau, National Credit Union Administration, Commodity Futures Trading Commission, Federal Deposit Insurance Corporation, Federal Housing Finance Agency, Federal Reserve System published a final joint rule to establish data standards to promote interoperability of financial regulatory data across these agencies. The standards will later be considered for potential incorporation into data standards to be adopted for certain collections of information in separate rulemakings by the agencies or through other actions taken by the agencies. At the effective date, the joint rule will not change any reporting requirements without further action by the agencies. (Federal Register)
Office of the Comptroller of the Currency (OCC)
The OCC seeks to amend its March 2 proposed rule to add one paragraph to proposed part 15 which would cross-reference the obligations in the Treasury AML and Sanctions Compliance proposed rule and would implement the GENIUS Act’s requirement for the OCC to issue regulations implementing appropriate Bank Secrecy Act and sanctions compliance standards. (Federal Register)
Internal Revenue Service (IRS)
The IRS announced it is finalizing new voluntary disclosure guidance for digital assets to allow taxpayers to report violations and mitigate penalties. (Tax Notes)
The National Taxpayer Advocate published the Fiscal Year 2027 Objectives Report to Congress, including an objective to “Help taxpayers with digital assets comply with reporting requirements. The objective included “Taxpayers need clear, timely, and practical guidance from the IRS to understand and meet their digital asset tax obligations. Many taxpayers are trying to comply with rules that are complex, evolving, and not fully explained in plain language. As a result, even well-intentioned taxpayers are making mistakes or avoiding compliance altogether. TAS will work with the IRS to improve guidance and establish a practical correction program so taxpayers who made errors or are unsure of their obligations have a safe, clear, and accessible path to come into compliance.” (Report)
Noteworthy Quotes
ADMINISTRATION
Internal Revenue Service (IRS)
On new voluntary disclosure guidance for digital assets, IRS Criminal Investigation division Chief Jarod Koopman said, “The digital asset piece, I’m thinking through that. Should we have it separate? Does that make more confusion? These are the questions. I want to make sure we’re simplifying the process.” He added, “I have a lot of experience in that space, so I’m conscious to a lot of the changes with CARF and the Clarity Act and the GENIUS Act and how that comes into play to be able to drive some of the components that we’re looking to do with a potential digital asset voluntary disclosure program.” (Tax Notes)
Commodity Futures Trading Commission (CFTC)
CFTC Chair Mike Selig posted “As I’ve consistently pledged, the CFTC is firmly committed to maintaining its exclusive jurisdiction over prediction markets, and today’s lawsuit against Kentucky is yet another example of the Commission protecting its federal authority.”
Securities and Exchange Commission (SEC)
SEC Chair Paul Atkins posted “Great to chat with John Moses, the SEC’s Director of the Office of Investor Education & Assistance. We discussed investor education, compound growth, Trump Accounts, digital assets, and how Americans can protect themselves from fraud. Listen wherever you get your podcasts!”
CONGRESS
CLARITY Act
Senate Majority Leader John Thune (R-SD) said, “If the White House has made a good faith effort to give them something on [ethics provisions], then yeah, I can see forcing the issue. I think the industry needs rules of the road…. In the end, there’s going to have to be critical mass to do this or there isn’t. I hope there is.” (Punchbowl)
Sen. Cynthia Lummis (R-WY) posted “I believe in America’s ability to lead. I believe in digital assets. I believe we are going to get the Clarity Act done.”
Lummis also posted “I have watched the digital asset community grow from the fringes to the floor of the United States Senate. I am so proud of every single person who made that happen. Now let’s get the Clarity Act to the president’s desk!”
Lummis also posted “Digital asset innovation doesn’t wait for regulatory clarity. It just moves somewhere else. I refuse to let that keep happening on my watch.”
Prediction Markets
Sen. John Curtis (R-UT) posted “Companies operating under the guise of federally regulated financial markets need to play by the rules. Reports that Polymarket used deceptive marketing tactics to promote gambling-style products raise serious questions about how these market operators should be regulated.”
Sen. Richard Blumenthal (D-CT) posted “Meta copied slot machines to addict kids to Instagram. Now Zuckerberg is turning his company into a prediction market. Meta’s business model is profiting from addiction—kids, gamblers, & more. Stop it through KOSA & my prediction markets bills.”
Blumenthal also posted “Instead, Polymarket is attempting to purchase & pander its way into amnesty. Bringing on Trump’s son as an ‘advisor’, sponsoring the White House UFC fight & more while the craven CFTC paves the way for Polymarket & others run roughshod over federal & state gambling laws”
Blumenthal also posted “Polymarket is flagrantly violating federal law & past legal orders, pretending to operate outside the US while it pays for influencers promoting fake bets to Americans. Any other Administration, the DOJ, CFTC & FTC would be shutting down gambling operations like this.”
Rep. Lori Trahan (D-MA) posted “As if Meta and its platforms like Instagram haven’t done enough damage to teens and young adults, now they want to get into prediction markets too? No, thank you.”
Rep. Dina Titus (D-NV) posted “I have a resolution that prohibits Members and staff from participating in any prediction markets. The Senate already adopted a similar version. Today’s markup displayed some impressive legislative gymnastics just to get to a narrower and less effective solution.”
Rep. Nikki Budzinski (D-IL) posted “Polymarket paid creators to film fake bets. That’s deception – plain and simple. Online prediction market platforms need real accountability and transparency. It’s why I introduced legislation like the PREDICT Act which will.”
Banning Policymaker Crypto Trading
In floor remarks requesting unanimous consent to pass his resolution banning Senators from trading stocks or crypto, Sen. Jon Ossoff (D-GA) said, “The American people want Members of Congress to stop trading stocks. The American people are sick and tired of this corruption, and in fact, this may be one of the most unifying issues in our deeply divided country. So, let’s take action right now today. We can pass this resolution. It’s very simple. It says that starting on January 1 of the new year, no U.S. senator can trade stocks or cryptocurrency. Those will be the rules of the Senate.” (Press release)
Sen. Cynthia Lummis (R-WY) objected, saying, “A blind trust is sufficient to ensure conflicts of interest are appropriately mitigated. Further, the House is currently working on the Stop Insider Trading Act, which is another. That’s another vehicle to address concerns similar to the gentleman from Georgia. So, this issue is an important issue to bring up. But it should go through regular order so it can be thoroughly discussed. Another point with the bill under consideration at the moment is the language does not define cryptocurrency. So, what is cryptocurrency? Are stablecoins used for payments included? Are non-fungible tokens included? So, this language needs clarification. This should go through regular order. This should go through committee. It should be thoroughly vetted. The language should be clarified.”
Ossoff responded, “If we adopt this rule right now, which will ban stock trading by Senators, effective the first day of the new year, we will have the time to finish the work of writing the legislation to implement this, but it’s not going to happen unless we set this deadline for ourselves, because there’s always some reason that keeps being suggested not to do this.” (Press release)
House Financial Services Hearing on the Future of Payments Q&A
Rep. Brad Sherman (D-CA)
Rep. Brad Sherman (D-CA): “This is about our 400th hearing on crypto and stablecoin. The VAT today we’re talking about payments, 99% of the payments out there do not involve stablecoin, but this, instead of having a hearing on how to give consumers a better deal with their debit cards and credit cards, we’re having a hearing as to how we can make people in the crypto world even richer, seems logical in that crypto provides far more impact money and political money than all the other institutions involved in financial services, times five, perhaps times 10, but we should instead have a hearing about credit cards, debit cards, and helping Americans buy a sandwich, rather than they were told that these companies are innovative. These companies use their political power to prevent innovation at the Fed, where they do everything possible to lobby against a central bank digital currency, and so instead we see the stablecoin, which is an oxymoron. Look at Terra USD, a disaster. People lost an awful lot of money. You, we saw unstablecoins with USD Coin and tether we could have an absolutely stable central bank digital currency, but there is no PAC supporting that. We clearly need the CFPB not only revived but regulating this space, because you have Zelle and other institutions that are subject to substantial regulation because they’re owned by or part of banks, and then you have this unregulated world, and then we’re told, well, let’s look at state regulation. Yeah, that’s absolutely outrageous. A lot of companies would pay $1,000 per person to everyone in the state of Wyoming to get a charter that would allow them to steal $100 from every Californian. We cannot allow a small state to sell out and hurt the consumers of California. What concerns me also is hurting the banking system, that system finances the vast majority of small businesses in our country, and as pointed out by Ms. Flynn, we have a community reinvestment act, so that everything in the banking system is subject to a requirement that at least some of it is spent to help disadvantaged communities. Ms. Paridon, some have argued that crypto and stablecoins could divert deposits from the banking system, especially if they’re able to maneuver their way around the compromise they agreed to, that there wouldn’t be interest payment paid on these stablecoins, as you know, bank deposits fuel community development banks are required to require comply with the Community Reinvestment Act, and every small business in my district as a loan from a bank. None of them have a loan from crypto world. Could you discuss the potential loss in ability to finance a small business and the Community Reinvestment Act as a result of stablecoin, or so-called stablecoin, pushing reducing bank deposits?”
Paige Paridon, Bank Policy Institute: “Sure, thank you. And it’s a great question, and we’ve spent a lot of time thinking about and looking at this issue. There is concern, particularly if stablecoins issuers through affiliate and other third parties are able to pay interest. interest, that there could be a flight of deposits out of the out of insured banks to stablecoin issuers, and as you note correctly, bank deposits fund loans to consumers, small businesses, including consumers of all economic levels, and there would be, based on the research we’ve done, a reduction in loans, or at a minimum, increase in the cost of credit, and a reduction in the availability of credit, were there to be deposit flight out of the regulated banking system. Banks have spent and continue to invest billions of dollars consistent with their obligations under the Community Reinvestment Act to fund small businesses and home financing in all communities, including low- and moderate-income communities.”
Rep. Stephen Lynch (D-MA)
Rep. Stephen Lynch (D-MA): “Thank you very much, Mr. Chairman. And I thank the witnesses for your willingness to help the committee with its work. So, Ms. Flynn, according to federal guidance, applicants for a federal master account must be in compliance with relevant laws and regulatory requirements related to payments to anti-money loan and anti-money laundering, to sanction protocols, and risk management, and they must not pose a risk to the Federal Reserve or financial stability. As the Ranking Member on the subcommittee on Digital Assets, we see huge daily fluctuations in the value of cryptocurrency, and I wonder, how the financial system can respond to that in a safe way for the consumer, it seems like every single scammer out there and ransomware attack requires payment in Bitcoin because it avoids all the legal protections and circumvents law enforcement. I’ll give you an example, so Synapse was a financial technology institution that promised to be a bridge between non-bank platforms and traditional partners. So, without supervision and regulation, Synapse filed inaccurate documents. They failed to properly locate and match consumer funds. They failed to disclose the total of funds they had in custody. The company also commingled deposits with uninsured dollars, which bank relate bank regulators estimate led to tens of thousands of Americans exposed to millions in total losses. So, given what has happened with Synapse, what should Congress be requiring as a minimum condition or minimum conditions before any fintech or digital asset company gains access to those bank like powers, and especially at a reserve master accounts.”
Tara Flynn, National Community Reinvestment Coalition: “Well, one of the things, or what I’m sorry. In order to gain access to those systems, they should be subject to the same requirements or bank-like requirements, and some of that would be supervision, right? You said that these were entities that aren’t supervised, that sort of gray area of where these third parties that are connecting banks and non-banks together, who supervise that supervises them, and ensuring that there are resources and staff available to conduct those kind of reviews is important in terms of your question. In about stablecoin, and how to make sure. Actually, let me ask you to clarify that?”
Lynch: “I was talking about the fluctuation between, you know, in Bitcoin, relatively short-term fluctuations, and also, I would add to that what happens in periods of stress, where there’s a flight to safety, you know what? What effect does that have in commercial banks, where people may want to have off some of these fintech banks, where people actually want to have that FDIC protection.”
Flynn: “Well, certainly one of the concerns is with the fluctuation in volatility of the crypto market, that that could create could infect essentially the banking system and make it so that there are, you know, bank runs. There’s this 24/7 aspect of stablecoin things happen outside banking hours, and all of a sudden there could be a massive run on a bank, and they wouldn’t be able to, you know, then then, like with Synapse, the problem would be that the communities would be, I mean, sorry, the government would be essentially bailing them out. With Synapse, what ultimately happened is that the bankruptcy took place, and the CFPB got involved and sought to use the civil money penalty fund in order to try to make those consumers whole, so somebody ends up holding the bag.”
Rep. Jim Himes (D-CT)
Rep. Jim Himes (D-CT): “So, Brad Sherman pointed out that we spend a lot of time on crypto, and I know this isn’t crypto, but you know there’s this - there’s a dozen plus stablecoin companies out there. Someday, am I going to walk into a 7-Eleven and choose between Bill’s stablecoin and Joe’s stablecoin and American Express stablecoin, is that the future of fragmentation, or is this going to collapse down into a couple of payment mechanisms?”
Rachel Anderika, Anchorage Digital: “I think that if we get this right, we’re not going to know that we’re paying with stablecoins, it’s going to be a rail, and there’s going to be liquidity on a rail, just the way that we have a stable or a credit card being attached to a network, and we have several of those.”
Rep. Bryan Steil (R-WI)
Financial Services GOP posted “WATCH: RepBryanSteil questions witnesses on how to mitigate risks associated with tokenization, to which Mr. Quaadman replies: ‘First off, you know, I think the leadership of Hester Peirce, Commissioner of the SEC, has been very important here and recognizing that tokens are also securities. I think we should also recognize, though, that a lot of activity in tokenization with U.S. Securities is actually happening in Europe. So I think we have to make sure that we’re putting a rule structure in place to deal with that.’”
Rep. Warren Davidson (R-OH)
Financial Services GOP posted “WATCH: Rep.Davidson questions witnesses on digital asset payment accounts, to which Ms. Anderika replies: ‘The way that our technology operates is that you are moving those assets and you’re directing that through our platform. It’s not the bank actually moving the assets. And so I think that’s important to understand.’”
Miscellaneous
In opening remarks at the House Oversight Subcommittee on Military and Foreign Affairs roundtable “Two Sides of a Digital Coin: Protecting U.S. Security by Challenging the Power of Repressive Foreign Regimes,” Rep. William Timmons (R-SC) said, “I have often said that Bitcoin and decentralized technologies represent a profound challenge to authoritarian control. As I have noted, when a regime can no longer control its citizens’ access to information or money, what do you have left? That is why I have described cryptocurrency as potentially the beginning of the end of all authoritarian governments. For millions of people living under repressive rule, the ability to store value, send money, or receive support from abroad without government interference can be lifesaving. It can also be an essential tool for dissidents, journalists, and activists who risk everything to get the truth out. In addition to the human rights implications, it is also critical that the United States maintain leadership in the development and regulation of digital assets. If we do not lead, others will. The Chinese Communist Party has made clear that it intends to shape global standards around state-controlled digital currency, surveillance-based financial systems, and cross-border payment architectures that advance Beijing’s geopolitical aims. Ensuring that democratic nations – not repressive regimes – set the norms for digital finance is essential to both our national security and the protection of individual liberty around the world.” (Press release)
Sen. Cynthia Lummis (R-WY) posted “The dollar’s reserve status was not an accident. It was the result of American leadership. That same leadership is required right now in digital assets.”
Lummis also posted “China is not confused about whether it wants to lead in digital assets. We should not be confused either.”
Lummis posted “The U.S. did not invent the internet and then hand it to someone else to govern. We are not doing that with digital assets either.”
On closing the gap between Republicans, Democrats, and the crypto industry on digital asset tax, Rep. Steven Horsford (D-NV) said, “If we just keep talking, there’s a way to get to yes.” (Punchbowl)
Industry Spotlight
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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
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