The House returns this week with about 60 session days left before the election. House Financial Services Chair Patrick McHenry is gearing up for a floor vote on landmark crypto legislation that represents one of his top priorities. But he’s facing growing doubts about whether it can get done. MM this morning has a deep dive into the state of play around McHenry’s plan to divide digital asset oversight between the SEC and CFTC, which he’s pushing with House Agriculture Chair G.T. Thompson. The committees approved the legislation last summer, and the effort has since faced a series of complications including October’s speakership meltdown, ongoing demands from fellow Republicans to tweak the proposal and now a razor-thin GOP vote margin. The legislation has attracted some bipartisan support but has virtually no shot of becoming law because of likely resistance in the Senate. It’s nonetheless a legacy item for McHenry, who is retiring, and a major milestone for the crypto lobby. The fact that it’s proven to be so difficult to advance in the generally crypto-friendly GOP House illustrates the ongoing political challenges around establishing digital asset policy in the U.S. “If you had told me last year that we'd be in April with really no clear path to a floor vote or plan? That would have surprised me,” said one crypto lobbyist who was granted anonymity to speak candidly. McHenry and Thompson are circulating what senior committee staff told MM is near-final text in hopes of a floor vote in the second quarter. They said they’re also circling back with Democrats who requested changes during committee votes last summer to make sure they’re satisfied. Six Financial Services Democrats supported it over the objections of ranking member Maxine Waters. An updated draft POLITICO scooped earlier this year included edits to address concerns about whistleblower protections and trading by lawmakers. No anti-money laundering provisions have been added, committee staff said last week. That’s an important component to watch because enacting new AML safeguards for crypto is a priority for some Democrats. Overall, aides working on the legislation said any changes will align with the overall thrust of the bill as it appeared last summer. But some crypto advocates are privately complaining that they’ve been left in the dark, which they argue could hinder lobbying efforts. “Not only has it not seen the light of day, but you can't advocate for something that's a state secret,” another crypto lobbyist told MM. Another outstanding issue is how to incorporate separate proposals from House Majority Whip Tom Emmer, who is one of the most outspoken pro-crypto lawmakers on Capitol Hill, as well as a pivotal ally in the fight for floor time. Emmer has long wanted to include his legislation that would shield digital assets sold as part of investment contracts from being regulated as securities. It was included in an updated version of the bill that House Financial Services Republicans privately briefed Democrats on in January. It runs the risk of hurting what’s already proven to be narrow Democratic support for the underlying legislation. Senior committee staff said they are still in talks with Emmer's team on the best way to finalize the language. McHenry and Thompson also have to weigh whether to back an accompanying vote on restricting central bank digital currency, another Emmer policy that could potentially isolate Democrats. Then there’s McHenry’s other crypto priority, legislation that would establish federal oversight of stablecoins. That bill, which unlike the SEC-CFTC plan may have a sliver of hope of some bipartisan Senate buy-in, has been the subject of talks for many months between McHenry, Waters, the Biden administration and regulators. If it ever moves ahead, it’s expected to be attached to another piece of must-pass legislation, according to House aides and lobbyists who flagged FAA reauthorization legislation as a possibility. McHenry said last month that he was confident about passing the stablecoin bill but that “we need a legislative vehicle.” For now, committee staff working on the crypto push said McHenry and Thompson are educating members on all the bills separately and will decide which measures move together based on the state of negotiations when floor time becomes available. Stay tuned for more Capitol Hill crypto news Tuesday, when Treasury Deputy Secretary Wally Adeyemo testifies at a Senate Banking hearing on illicit finance. Happy Monday – Send tips to zwarmbrodt@politico.com and keep up with Eleanor at emueller@politico.com and @Eleanor_Mueller.
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