As Congress returns from summer recess, Sen. Bill Hagerty (R-Tenn.) called for crypto legislation on Thursday, arguing that the lack of regulatory clarity could push the industry outside of the U.S.
“It is a terrible environment,” Hagerty told an audience at the libertarian-leaning Cato Institute. “For those companies who are trying to invest and expand, it’s forcing them to look overseas to more favorable regulatory environments.”
Until the collapse of the Sam Bankman-Fried-led crypto exchange FTX last November, the need for crypto regulation was a largely bipartisan push. Committees across both the House and Senate advanced bills extending to different parts of the industry, from stablecoins to market structures.
Bankman-Fried’s frequent presence in D.C.—and his prodigious habit of donations—complicated the matter, with many lawmakers, especially in the Democratic party, calling for a slowdown on any legislative discussions. In the meantime, agencies including the Securities and Exchange Commission upped enforcement actions, much to the chagrin of the crypto industry.
Hagerty has emerged as a leading voice in the Senate on crypto. While he hasn’t introduced any bills this year, he has written public letters to key officials on digital asset regulation, including one in March to Federal Reserve Chairman Jay Powell, FDIC Chairman Marty Gruenberg, and Acting Comptroller of the Currency Michael Hsu arguing that financial institutions’ pressure on crypto firms “seems disturbingly reminiscent of Operation Choke Point,” a popular refrain within the crypto industry.
At the Cato event on Thursday, Hagerty called for an incremental approach to crypto legislation, pointing to a stablecoin bill he introduced in 2021 that was two pages long. “I admire my colleagues, but it seems that they value the legislation based on how many pages are in it,” he said.
Hagerty decried the “regulation by enforcement” approach of the SEC, instead arguing that congressional bodies like his Senate Banking Committee should host more oversight hearings with SEC Chair Gary Gensler. He expressed confusion over why Gensler had become a leading critic of the crypto industry after teaching a blockchain course at MIT, citing reports that Gensler had even approached the crypto exchange Binance to serve as an advisor.
The SEC has pushed back on criticism from the Republican party, with director of enforcement Gurbir Grewal arguing in June that crypto presents a “perfect storm of investor risk.” The SEC filed 13 charges against Binance in a lawsuit earlier that month.
Echoing other Republican lawmakers, Hagerty also criticized central bank digital currencies, or CBDCs, which he said could move the U.S. closer to China in terms of policing economic behavior. He pointed to President Joe Biden’s nominee to the Office of the Comptroller of the Currency, Saule Omarova, who called for a government-led digital currency in the wake of March’s banking crisis.
“Looking for a crisis to then try to advocate for something—that would be very concerning,” Hagerty said.