Lawmakers are 'like a steamroller': Crypto, TradFi and Senate Banking Committee members meet to discuss crypto bill

Lawmakers are like a "steamroller" headed toward advancing crypto legislation, as industry advocates alongside traditional finance heavyweights met with senators on Wednesday to discuss the bill.

The meeting, which lasted about an hour and a half, was with members of the Senate Banking Committee along with the Blockchain Association, Crypto Council for Innovation, and on the traditional finance side — the Financial Services Forum and the Securities Industry and Financial Markets Association, according to a source familiar who spoke with The Block.

"I think they are like a steamroller heading toward a markup in January," said Kara Calvert, vice president of U.S. policy at Coinbase. "They have made a ton of progress in the last few weeks."

The Senate Banking Committee has a draft that seeks to regulate the crypto industry at large in part through allocating jurisdiction between two main federal agencies — the Securities and Exchange Commission and the Commodity Futures Trading Commission — as well as creating a new term for "ancillary assets" to clarify which cryptocurrencies are not securities. There was some optimism that the Senate Banking Committee would hold a hearing to amend and vote on the bill before the end of the year, but earlier this week, a Senate Banking Committee spokesperson confirmed that the markup would have to hold off into the new year.

In a memo, The Digital Chamber CEO Cody Carbone called the meeting productive.

"A productive meeting today with key Senate Banking leaders reinforces my confidence that market structure is still making progress, despite the absence of any Senate committee hearings on digital assets this week," said Carbone, who was in the room.

Senate Banking Committee Chair Tim Scott, R-S.C., held the meeting, Carbone said. Democratic Sen. Mark Warner was in the room, while top Democrat of the Senate Banking Committee Sen. Elizabeth Warren was not, the person familiar said.

Issues being ironed out during Wednesday's meeting include how to define what is a security or a commodity, as well as decentralized finance and how determining intermediaries is factored in. Issues around stablecoin yield were also discussed.

Banks and the crypto industry have butted heads over the treatment of yield-generating stablecoins. Banking associations have argued that a stablecoin bill, dubbed GENIUS, passed into law over the summer, has gaps that need to be closed. At issue, they say, is the stablecoin law's alleged weak prohibitions against stablecoin issuers paying interest to holders, which could make these assets more attractive stores-of-value and credit mechanisms rather than simply a means of payment, creating "distorting market incentives" for the banking sector.

Meanwhile, some in the crypto industry have argued that allowing crypto firms to pay interest on stablecoins is "healthy competition."

When asked how things stood between crypto and TradeFi players during Wednesday's meeting, Calvert noted some tension.

"The tension was visible, but not hostile," Calvert said. "What I took away from it is that it didn't feel like anybody was trying to kill the bill. I think that's important."

There are disagreements, but people want to reach a compromise, Calvert added.

"Ultimately, you'll see members who are going to have to make some tough calls," she said.