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Crypto Ally Patrick McHenry Set to Retire Leaving Hole in U.S Digital Asset Legislation

Last Updated December 7, 2023 2:32 PM
Teuta Franjkovic
Last Updated December 7, 2023 2:32 PM

Key Takeaways

  • Crypto advocate Rep. McHenry’s retirement creates uncertainty for U.S crypto legislation.
  • Crypto companies are likely to operate under the existing framework in 2024.
  • Coinbase lawsuit outcome could influence future regulation.
  • Historical trends suggest legal ambiguity won’t deter crypto rallies.

Rep. Patrick McHenry, who chairs the Financial Services Committee and notably served as the Speaker pro tempore following former Speaker Kevin McCarthy’s departure, is known as one of the biggest crypto advocates in the US Congress.

On Tuesday, December 5, he announced  that he would retire at the conclusion of the Congress, marking the conclusion of his nearly two-decade tenure in Congress, a period that saw him in a prominent role during the McCarthy drama earlier this year.

McHenry received widespread applause from members across party lines for his handling of the situation, leading to speculation about the possibility of him ascending to the position of Speaker.

Rep. McHenry – Driving Crypto Legislation in the U.S.

Representative Patrick McHenry has been a steadfast advocate for the cryptocurrency industry, leveraging his influential position as the head of the House Financial Services Committee to introduce legislation aligned with the interests of the crypto sector, even if it hasn’t reached the finish line.

Analysts suggest that McHenry may be particularly motivated to achieve tangible results in an effort to solidify his legacy before his departure. According to analyst Jaret Seiberg , “It is now or never for the chairman. That provides him an incentive to cut deals to create a legacy-sealing package before he departs.”

Two key bills championed by McHenry aim to establish regulatory frameworks for stablecoins and crypto brokerages such as Coinbase Global.

Coinbase has actively lobbied in Washington, advocating for the bill that addresses market structure, contending that the company faces uncertainty in complying with existing, decades-old securities laws.

The potential passage of these bills could significantly shape the regulatory landscape for the cryptocurrency industry in the United States.

Crypto Legacy on Shaky Ground: Bills Face Bipartisan Resistance

Despite potential passage in the House, both bills face a lack of support among Democrats in the Senate and the Biden administration, making it improbable for them to become law. The outlook for these bills is unlikely to shift in the coming year, and their chances may even diminish as the 2024 election nears, diverting attention away from significant legislative initiatives due to campaign-related activities and fundraising efforts.

For cryptocurrency companies, this means they are likely to continue operating under the existing regulatory framework for the next year, hoping for a favorable shift in dynamics with the assumption that the incoming chair of the House Financial Services Committee in 2025 will share Rep. McHenry’s commitment to making legislative progress in the crypto space.

Crypto Industry Braces for SEC Showdown as Bills Stall

As of now, the immediate concern for companies in the cryptocurrency space, including Coinbase, revolves around their ability to effectively fend off a potential crackdown by the Securities and Exchange Commission (SEC) within the existing regulatory framework.

In June, the SEC filed a lawsuit against Coinbase, alleging that the platform operated as an unregistered securities exchange. Coinbase is actively contesting the lawsuit, and oral arguments to determine the case’s progression are scheduled for January 17.

The outcome of this legal battle, especially if judges side with Coinbase or other crypto firms, asserting that the SEC lacks the authority to pursue significant portions of the crypto industry, could serve as a catalyst for Democrats and Republicans to engage in negotiations and reach a consensus. However, a more likely scenario is that these court cases will extend over several years, offering unclear and protracted guidance rather than prompt resolutions.

Despite the prevailing uncertainty, historical trends have shown that legal ambiguities have not deterred cryptocurrency rallies. As of now, the industry is poised to operate under a continued legal cloud, with ongoing legal challenges shaping its trajectory in the foreseeable future.

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