(Bloomberg) — The implosion of Sam Bankman-Fried’s FTX empire hasn’t dimmed the enthusiasm for digital currency among cryptocurrency fans in the US Capitol.
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With cryptocurrency skepticism growing among members of Congress, a handful of lawmakers, including Republican Senators Cynthia Lummis of Wyoming and Pat Toomey of Pennsylvania, are trying to convince colleagues that the FTX fiasco does not diminish the underlying value of the currency digital.
“There are two conversations going on. One is FTX and the other is digital assets,” Lummis said on Bloomberg Television’s “Balance of Power with David Westin.” “We’re merging the two in some of these discussions.”
However, FTX has opened a rift between some Republicans and Democrats. Since last month’s FTX crash and other turmoil in the cryptocurrency market, Democrats are more likely to say the fraud allegations against Bankman-Fried demonstrate a pattern of unpalatable behavior in the industry, while many Republicans see FTX as an outlier .
In a House hearing Tuesday on FTX, Rep. Brad Sherman, a Democrat from California who has long wanted to ban cryptocurrencies, said his fear is that people would view Bankman-Fried as a snake in a state garden. ‘Eden, but that, in reality, “crypto is a garden of snakes”.
Rep. Tom Emmer of Minnesota, the incoming GOP whip and co-chair of the Blockchain Caucus, said during the same hearing that FTX represented a corporate failure and a crime, “not a technology failure.”
“For the most committed members of Congress on cryptocurrency policy, the collapse of FTX reminds us why we care so deeply about this technology — decentralization is the point,” Emmer said.
Another House Republican, Patrick McHenry, who is set to lead the financial services committee next year, said he was “an advocate for digital assets and the potential it has as the cornerstone of the next Internet.”
Toomey, the top Republican on the Senate Banking Committee, held up to $45,000 in digital assets last year, according to the most recently recorded financial disclosures. He said he continues to see a lot of value in digital currencies, adding that they should be regulated, starting with stablecoins, which are backed by underlying assets such as dollars.
Echoing Lummis, Toomey, who will retire at the end of this term, said at a banking committee hearing on Wednesday that “FTX and cryptocurrencies are not the same thing. FTX was opaque, centralized and dishonest. Cryptocurrencies usually they are open-source, decentralized and transparent.”
Lummis has proposed legislation with Senator Kirsten Gillibrand, a Democrat from New York, to create a regulatory framework for cryptocurrencies, one of many that have been proposed.
Lummis argues that most digital currencies should be regulated by the Securities and Exchange Commission, but Bitcoin should be regulated by the Commodity Futures Trading Commission as a commodity.
“Bitcoin’s case as a store of value is solid,” he said, noting that it’s small in number, is completely decentralized, and not controlled by anyone. “It has the characteristics of a commodity”.
Lummis’ disclosure showed holdings of $100,001 to $250,000 in Bitcoin since last year, though he said Wednesday his assets are in a blind trust, “so I don’t know if I have Bitcoin” at the moment. Cryptocurrency valuations have also dropped significantly this year.
Lummis said he was optimistic about passing the legislation next year, with the new Republican majority in the House and Gillibrand working with the Biden administration, aiming to forge a bipartisan, “asset neutral” bill.
“We’re going to do a whole court print,” he said.
Republican Sen. Thom Tillis of North Carolina, another member of the banking committee, also sees the potential for bipartisan legislation next year on the regulation of cryptocurrencies and non-bank fintechs.
“It could very well be that, if we research, it might need to be banned, but I’m not there yet,” he said, adding that he would not invest in cryptocurrencies himself just yet. “It’s not proven.”
–With assistance from Jarrell Dillard, Allyson Versprille and Madison Mills.
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