House Republicans are moving to regulate encryption with a new subcommittee

Rep. French Hill, R-Arkansas, left, speaks during a news conference on Capitol Hill in Washington, D.C., July 24, 2018.

Zack Gibson | bloomberg | Getty Images

Republican lawmakers late Thursday announced the launch of a new subcommittee that will oversee the digital currency and financial technology industries, the first of its kind in the United States, after a turbulent period for digital currencies.

French Hill of Arkansas will chair the Digital Assets, Fintech, and Inclusion Subcommittee, which will be part of the House Financial Services Committee.

Hill, who was also named vice chair of the broader committee, said in a statement that a bipartisan effort is needed for “fintech innovation to safely and effectively flourish in the United States.”

The unregulated nature of the cryptocurrency industry emerged as a pressing concern late last year following the collapse of cryptocurrency exchange FTX in November. Sam Bankman-Fried, the founder of FTX, was arrested last month for fraud and released on a $250 million bond while he awaits trial.

Hill has been an ardent supporter of the cryptocurrency industry. In 2021, he co-sponsored the Central Bank Digital Currency (CBDC) Study Act and said at the time that it was “important for the Fed not to delay its important work” on a potential CBDC.

In 2019, before FTX was even a household name, Hill signed a letter urging the IRS to improve its tax guidelines for cryptocurrency users.

“Ambiguousness impedes proper tax compliance,” the letter read.

Republican advocates of encryption in Congress include Rep. Tom Emmer of Minnesota and Sen. Cynthia Loomis of Wyoming.

Although Bankman-Fried operated in the Bahamas, he was a shrewd agent in Washington, having relationships with Rep. Maxine Waters (D-Calif.) and Rustin Benham, chairman of the CFTC. In the 2022 midterm races, Bankman-Fried has made nearly $40 million in declared contributions, most of it to Democrats. He and his comrades donated to the politicians on both sides of the aisle.

Federal regulators alleged that Bankman-Fried committed criminal campaign finance violations in the course of the $8 billion fraud.

The collapse of FTX and the subsequent indictment of Bankman-Fried have provided Republicans like Eimer with ample fodder to criticize the regulators’ action. Eimer called the actions taken by Securities and Exchange Commission Chairman Gary Gensler “haphazard and unfocused.”

Senate Democrats, meanwhile, have already begun preparing their own efforts to oversee the cryptocurrency industry and dictate enforcement actions.

The SEC has stepped up its level of activity since FTX entered bankruptcy. The committee charged crypto lender Genesis and crypto exchange Gemini with unregistered selling and offering of securities on Thursday, the same day Hill announced the subcommittee.

Watch: Bitcoin is $19,000, Gemini and Genesis are charged by the SEC

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