Using a New Panel, House Republicans Attempt to Control the Cryptocurrency Industry

Main Points

• Late on Thursday, Republican lawmakers announced the formation of the House Financial Services Committee's Subcommittee on Digital Assets, Financial Technology, and Inclusion.
• The group's chairman is French Hill from Arkansas.
• After FTX's multibillion-dollar collapse in November, crypto regulation and industry monitoring have been elevated to the top of the agenda.

On July 24, 2018, Republican representative French Hill of Arkansas speaks at a news conference on Capitol Hill in Washington, D.C. Zach Gibson | Bloomberg | Getty Images

After a turbulent time for digital currencies, Republican lawmakers on Thursday night announced the creation of a special subcommittee to monitor the crypto and fintech sectors, the first of its kind in the United States.

The Subcommittee on Digital Assets, Financial Technology, and Inclusion, which will be a part of the House Financial Services Committee, will be led by French Hill of Arkansas.

A bipartisan effort is required, according to Hill, who was also named vice chair of the larger committee, for "FinTech innovation to flourish securely and effectively in the United States."

After the collapse of the cryptocurrency exchange FTX in November, late last year, the unregulated nature of the business became a serious issue. The creator of FTX, Sam Bankman-Fried, was detained last month on suspicion of fraud and freed on a $250 million bond as he awaits trial.

Hill has been a fervent advocate for the cryptocurrency sector. He co-sponsored the Central Bank Digital Currency (CBDC) Study Act in 2021, at which time he stated that it is "essential for the Federal Reserve to not delay its vital work" on a prospective CBDC.

Hill co-wrote a letter in 2019 encouraging the IRS to improve its tax advice for cryptocurrency users, long before FTX became well-known.

The letter stated that "ambiguity prevents appropriate tax compliance."

Republican congressmen Tom Emmer of Minnesota and Cynthia Lummis of Wyoming have also advocated for cryptocurrency.

Despite working out of the Bahamas, Bankman-Fried was a competent Washington insider who developed connections with power players like Rostin Benham, head of the Commodity Futures Trading Commission, and Rep. Maxine Waters, a Democrat from California. Bankman-Fried contributed about $40 million in publicly reported donations to Democrats in the 2022 midterm elections. He and his friends gave to politicians on opposing sides of the political spectrum.

Bankman-Fried is accused by federal officials of committing illegal campaign financing crimes while carrying out a $8 billion swindle.

The demise of FTX and the ensuing indictment of Bankman-Fried have given Republicans like Emmer plenty of material to criticize the efforts of regulators. Gary Gensler, chair of the Securities and Exchange Commission, was criticized by Emmer for his "haphazard and unfocused" acts.

Meanwhile, Senate Democrats have already started putting together their own initiatives to control the cryptocurrency business and direct enforcement measures.

Since FTX went bankrupt, the SEC has increased its level of activity. The unregistered sale and offering of securities charges were brought by the commission against cryptocurrency lenders Genesis and Gemini on Thursday, the same day Hill announced the panel.