House Financial Services Committee follows House Agriculture Committee and votes to advance crypto market structure bill

Now both the House Agriculture Committee and the House Financial Services Committee have advanced landmark legislation to regulate cryptocurrencies at large following political hurdles related to President Donald Trump's interests, teeing it up to the House to consider.

The House Agriculture Committee voted on Tuesday, 47 to 6, to advance the Digital Asset Market Clarity Act, or Clarity for short. Later in the evening, the House Financial Services Committee voted 32 to 19 to advance the bill. 

Following the Clarity Act being advanced out of both committees, the bills will be formed into one comprehensive bill, according to a Republican aide. The bill then goes to the full House for a vote.

The bill would create a clear regulatory framework for crypto in part through designating how the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission will regulate. The bill also requires digital asset firms to provide disclosures to customers and segregate customer funds from their own.

On Monday, a measure was added to the amended text that would clarify that non-custodial crypto platforms — and the developers that build them — are not money transmitters or operators of an "unlicensed money services business."

The House Financial Services Committee passed a similar bill out of its committee in the last Congress and later the full House, but it didn't pick up traction in the Senate.

The Clarity Act has hit a few snags since being introduced last month. Trump's involvement with crypto from the debut of Trump-backed World Liberty Financial and later the launch of its own stablecoin, to the president's decision to put forward a memecoin and host a dinner for the top holders, has repeatedly drawn scrutiny from Democrats. At one point, House Financial Services Committee Republican Chair French Hill said that Trump's crypto moves complicate efforts to pass a separate bill focused on stablecoin regulation.

However, Rep. Andy Barr, R-Ky., accused Democrats last week of launching a "baseless politically motivated attack against President Trump."

Some Democratic aides also raised alarm bells over the SEC's routine involvement in providing technical assistance on legislation. They said people on the call representing the SEC were not able to answer simple questions and alluded to some information being privileged. They also said Republicans were provided with written technical assistance, which is routinely done between staffers and agencies when contemplating legislation, but they weren't.

Top Democrat of the House Financial Services Committee, Maxine Waters of California, said that SEC Chair Paul Atkins did not give insight to Democrats on the bill. A Democratic aide also told The Block that they still hadn't received technical assistance from the SEC as of Tuesday afternoon. 

"I suppose he's decided that if he can't say something nice, he won't say anything at all, or Trump won't allow him to say anything," Waters said during the hearing on Tuesday.

As the House Agriculture Committee debated Clarity earlier on Tuesday, some lawmakers brought up concerns over the need for more funding and staff at the CFTC. The CFTC is a smaller agency with less than a thousand employees, compared to the SEC's over 4,000. Six-hundred staff members left the SEC earlier this year, according to Reuters. 

Rep. Andrea Salinas, D-Ore., said Clarity was "far from perfect," but said it helps bolster financial protections for customers through requiring exchanges to maintain capital to cover operational costs and its obligations to customers, in turn preventing the next FTX, she said. 

"Let's be clear, none of these rules will matter if our regulators don't actually have the resources to enforce them," Salinas said. "Both the CFTC and SEC have told us that they're under resourced for the scale of the task ahead."

Trump concerns continue

Later in the day during the House Financial Services Committee's debate on the Clarity Act, Waters looked to amend the bill to limit conflicts of interest as it relates to Trump. It would block the president, vice president, lawmakers and their immediate families "from engaging in crypto corruption and blatant conflicts of interest," Waters said. 

"Importantly, it would stop all of President Trump's crypto conflicts to date," Waters said. 

Hill argued that the Clarity Act is "not an ethics bill." 

"So in my judgment, it is not necessary to support the Waters amendment," Hill said. 

Concerns over Trump's crypto interest continued to come up over the several hours long hearing. Democrat Rep. Stephen Lynch of Massachusetts said the bill does "nothing to prevent the president from furthering his corrupt enterprise." 

"While my Republicans colleagues would prefer we bury our heads in the sand and ignore the obvious conflicts of interest between President Trump's crypto ventures and his actions to deregulate the crypto industry — I refuse to sit back and allow this corruption to continue," he said. 

Republican Rep. Bryan Steil of Wisconsin then told his fellow lawmakers to follow a committee rule that he said says members can't engage in personalities against the president. 

"Ugh I'm going to," Waters quickly said in response.

Updated at 6:05 p.m. UTC time to include details 

Updated at 3:55 a.m. UTC time to include House Financial Services Committee vote, update headline and add details throughout