National security issues generally take precedence over other legislation, experts say.
The main crypto-related bills before Congress now concern the rules governing stablecoins and the decision of who should have regulatory authority over cryptocurrencies.
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Posted October 2, 2024 at 5:00 PM EST.
The chances of Congress passing stablecoin legislation or the Senate approving the FIT21 crypto asset regulatory framework this session are slim, given the lack of necessary majorities and the many competing priorities for Congress’s attention . But the sudden rise in tensions in the Middle East this week reduces these already minimal probabilities by the hour.
“Large developments in national security tend to derail planned legislation,” said Ron Hammond, director of government relations at the Blockchain Association.
Over the past two days, Israel and the Lebanese militant group Hezbollah have begun struggle on the ground, in southern Lebanon, a notable escalation of the conflict between two groups who have until now been reluctant to cross the Israeli-Lebanese border. On Tuesday, Iran also licensed 180 missiles on Israel, several of which breached Israel’s “Iron Dome” missile defense system and made landfall in the central and southern regions of the country. These two developments mark a rapid expansion of a conflict which, until recently, mainly pitted Israel and the Palestinian armed group Hamas.
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News on Tuesday that Iran was deploying missiles against Israel sent the price of bitcoin, seen by some as a riskier asset, fell 2%. But the most significant impact of rising conflict in the Middle East may be on the prospects for potential crypto legislation in the United States, as the latest developments shift Congress’s attention away from topics that are not questions of life and death.
Even if the house pass FIT21, a bill that would bring most digital assets under the regulatory authority of the CFTC, failed to advance in the Senate earlier this year, where Senate Banking Committee Chairman Sherrod Brown (D -OH), Senator Elizabeth Warren (D-MA) and others oppose the absence of anti-money laundering (AML) provisions in the bill.
The Stablecoin legislation, meanwhile, has found more bipartisan support, with Rep. Maxine Waters, the top Democrat on the House Financial Services Committee, exhorting The parties are expected to reach a compromise before the end of the year at an SEC congressional hearing last week. “I firmly believe we can reach an agreement that prioritizes strong protections for our nation’s consumers and strong federal oversight,” Waters said.
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However, Jaret Seiberg, an analyst at TD Cowen’s Washington Research Group, wrote in a note on Monday, he said he was “pessimistic” about passing either bill, although stablecoin legislation is somewhat more likely.
Even without an escalation of the war involving one of the United States’ key allies, Congressional attention is divided. Issues such as inflation and border security are higher on the agenda than cryptocurrency legislation, according to experts, who add that cryptocurrencies’ best chance of getting legislation passed implied attach to other high-priority bills, like the SAFER banking bill, which would give the marijuana industry expanded access to financial services.
A stable bill “certainly should be tied to other legislation,” said H. Joshua Rivera, general counsel at venture capital firm Blockchain Capital. “But the conflict in the Middle East certainly does not improve the outlook.”
Hammond agreed. “Congress still has many items to address between now and the end of the year, and as it stands, stablecoin legislation is part of a mix of potential items,” he said. he declared. “While it is too early to determine the implications of developments in the Middle East on (a) lame duck (session), there is precedent (that) these broader issues occupy almost all the attention.”
