Will Washington clamp down on crypto?
Sam Bankman-Fried is set to testify before Congress tomorrow. If he does so, it will be the latest in a series of public appearances and interviews that suggests the disgraced crypto conman thinks he can spin his way out of trouble — and leaves the rest of us wondering, why isn’t he in jail yet?
The hearing comes as Washington mulls how the law should handle cryptocurrencies. For some time now, lawmakers have wanted to do something about the burgeoning crypto craze and address the fact that no comprehensive regulatory framework for the sector exists. The fall of FTX underscored the point. With further trouble afoot in crypto-world, Washington is divided on muddled and cross-party lines over what to do about this Wild West of finance.
The first, and largest camp, consists of lawmakers who see the stunning collapse of the biggest player in crypto as evidence of the urgent need for more regulation. Among the prominent voices in this camp are Elizabeth Warren and Sherrod Brown, two progressive Democrats who sit on the Senate Banking Committee (Brown is the committee’s chair). Warren summed up the prevailing thought when, writing in the Wall Street Journal shortly after FTX’s collapse, she argued that the meltdown made clear that “Congress must plug the remaining holes in our regulatory structure — before the next crypto catastrophe takes down our economy.”
Interestingly, this group includes crypto boosters as well as skeptics. Outgoing Republican senator Pat Toomey, who has himself bought cryptocurrencies, has also slammed the regulatory inaction highlighted by the fall of FTX. Cynthia Lummis, another pro-crypto Republican senator, has taken a similar line since the FTX meltdown.
A second camp is no fan of cryptocurrencies but thinks extensive new rules would be a big mistake. According to this position, to ramp up crypto regulation would be to incorporate it into the financial system and bestow cryptocurrencies was a level of respectability and legitimacy that they don’t deserve. This starting point can lead to two surprisingly different conclusions. The first is a blanket crypto ban. One lawmaker who takes this view is Jon Tester, the independent-minded Democrat from Montana. On Sunday’s Meet the Press, Tester said, there’s “no reason why crypto should exist.”
To some, though, the dramatic collapse of FTX was a reassuring demonstration that crypto does not present any kind of major risk to the financial system. The largest crypto exchange could go up in flames and it had very little impact beyond the losses suffered by its customers. “It takes a lot of squinting to see much sign of the cryptopocalypse,” argues Megan McArdle in today’s Washington Post. The best thing to do, then, would be nothing. Don’t ban crypto, a difficult and potentially counterproductive step. Just make sure the crazy crypto casino remains cut off from the rest of the economy. “Let it burn,” argued two finance professors in the Financial Times recently.
Another argument against the need for further regulation is the fact that FTX looks like it broke multiple existing laws, and so its downfall isn’t necessarily evidence of the need for new rules.
An irony of the crypto regulation debate that clouds things — or should cloud things — is the fact that, prior to his firm losing billions in customers’ cryptocurrency, Sam Bankman-Fried was the loudest industry voice calling for more rules on digital currency, and a massive donor to Democratic candidates. According to the New York Times, Bankman-Fried donated about $40 million to campaigns and committees during this election cycle, and that is the tip of the iceberg of his political and philanthropic spending. Direct and indirect recipients of Bankman-Fried’s largesse are set to lead the charge on regulating an industry whose recklessness he has come to epitomize.
Action certainly seems more likely than inaction. Regulators with idle hands are a rare thing. But, with its choppy cross-currents and sometimes unlikely alliances, expect Washington’s debate over what to do about crypto to get a whole lot messier.
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Jan 6 Committee readies its report
Politico’s Kyle Cheney and Nicholas Wu bring news of what the January 6 Committee’s final report will look like. The Committee is applying the finishing touches this week and will approve the report at an open-door meeting on December 21. The outline of the report suggests it will follow the structure of the committee’s investigation and aim at a comprehensive account of both the build up to, and events of, January 6, 2021. But how much further impact will the report itself have? The panel deployed its most explosive evidence in prime-time hearings.
The outstanding will-they-won’t-they question concerns criminal referrals. Yesterday, committee members met to discuss the move. Committee chair Bennie Thompson said last week that “there’s general agreement we will do some referrals.” But who will be on their list? A criminal referral for Donald Trump would carry some symbolic significance and put the former president back in the spotlight. But it’s important to remember that such a move would be nothing more than advisory, with the Justice Department in no way bound by a House committee’s conclusions.
Another year, another spending showdown
It’s mid-December in Washington, which means it’s time for another mad dash to strike a year-end tax and spend deal. Friday is the deadline for Congress to fund the federal government and Democrats and Republicans have plenty to negotiate over in what is expected to be a roughly $1.5 trillion package. While weekend negotiations did not yield many signs of progress, Democrats today decided against releasing their own funding package — a sign of some movement. This year’s negotiations are complicated by internal Republican politics. Mitch McConnell feels more pressure than usual from hardliners in his own party and Kevin McCarthy is desperate to prove his conservative bona fides ahead of the early January vote on the next speaker.
What you should be reading today
Lewis M. Andrews: How hating Big Oil undermines the environment
John Pietro: Why China’s budding relationship with the Saudis spells trouble
Peter Van Buren: Is the Supreme Court about to rule in favor of conscience rights?
Nick Miroff et al: Washington Post: Washington faltered as fentanyl gripped America
Elaine Shannon, Politico: ‘The merchant of death is back in action’
Alex Gutentag, Tablet: The recess of responsibility
Poll watch
President Biden job approval
Approve: 41.9 percent
Disapprove: 53.8 percent
Net approval: -11.9 (RCP average)
Vice President Harris favorability
Favorable: 37.3 percent
Unfavorable: 51.8 percent
Net favorability: -9.4 (Politico/Morning Consult)
