The push to pass major cryptocurrency legislation has found a second wind. Stalwart progressives atop House Financial Services and Senate Banking are opening the door to advancing landmark policy changes that could help legitimize digital assets in the U.S. Senate Banking Chair Sherrod Brown, a longtime crypto critic, and Rep. Maxine Waters, the top Democrat on House Financial Services, hold the keys to what could be the biggest U.S. lobbying win ever for digital asset firms. A recent shift from Brown is helping breathe new life into the effort, which is being driven by Waters and retiring Financial Services Chair Patrick McHenry. But Waters and McHenry may still need to do a delicate dance to win over Brown, who has long warned of consumer protection and illicit finance concerns with crypto and said he won’t support an “industry bill.” Sen. Elizabeth Warren, Capitol Hill’s most vocal crypto foe, is another X factor to watch in the Senate as the negotiations play out in the coming weeks and months. She has already warned Waters and McHenry of potential risks. Enacting the first big U.S. crypto law is a legacy-defining push for McHenry, who says he is close to a deal on a bill with Waters. Their agreement could test how far crypto-skeptical Democrats are willing to go with legislation that could be a boon for the industry — and what pro-crypto Republicans might be willing to give up in return. “There’s a lot of [crypto] skepticism,” said Rep. Brad Sherman, a California Democrat and crypto critic who is also a senior member of Financial Services. “At the same time, Maxine Waters has a lot of credibility. We’ll have to see what’s in the bill.” The legislation would create a regulatory framework for stablecoins, a variety of digital token that’s pegged to assets like the U.S. dollar. Waters and McHenry have been seeking an agreement on a stablecoin bill for years, but eleventh-hour snags — including opposition from the White House — have derailed past efforts. This time, they appear to be closer than ever: The duo met with Senate Majority Leader Chuck Schumer last week to pitch him on advancing their legislation. But crypto critics could still stand in the way as they push for anti-money laundering restrictions that the industry hates. “We cannot bring stablecoin into the financial system without full protections in place to ensure that it is not used by terrorists, drug traffickers and rogue nations,” Warren told MM this week. Brown said Tuesday he is “very open” to working with McHenry and Waters on a stablecoin deal — a shift from the past — but indicated he wants to see it move alongside crypto consumer and illicit finance protections, as well as his other legislative priorities. A stablecoin deal could provide Brown, who’s facing a tough reelection campaign, an opportunity to pass his other agenda items, including a bank executive compensation clawback bill, the RECOUP Act; and legislation to allow the cannabis sector access to financial services, the SAFER Banking Act. The stablecoin effort could face resistance from crypto skeptics on Waters’ committee, some of whom pushed for changes last year when she and McHenry were close to an agreement. “If you blindfolded us and said, ‘Do you have faith in Maxine Waters?’ We’d all raise our hands,” Sherman said. “If you blindfolded us and said, ‘are you skeptical of anything to do with crypto?’ Most of us would raise our hands.” Rep. Sean Casten, an Illinois Democrat, told MM that during earlier negotiations “there was a lot of involvement from Dems on committee with Maxine and her staff around what we would need to see to get to 'yes.'" “We never got to a bill that was dropped because we never found a way to work those things in,” he said. Waters told MM last week she hasn't yet been whipping votes. "It's been 22 months learning, educating and making sure we do whatever it takes to protect the investors," she said. Stablecoin legislation is a priority for the Treasury Department. Treasury spokesperson Chris Hayden said in a statement that Secretary Janet Yellen “has repeatedly said that the regulatory status quo for stablecoins is unacceptable and legislation is the best way to address the risks that they pose.” “Treasury has and will continue to engage with members of Congress that pursue bipartisan legislation that preserves existing authorities and establishes a regime designed to protect consumers and the financial system,” he said. It’s unclear, however, how the White House and its National Economic Council — which is staffed with Warren allies — view the issue. Last summer, McHenry blamed the White House for tanking stablecoin talks. (A White House spokesperson declined to comment.) The stablecoin drama is playing out as the crypto industry is waging a well-funded campaign to influence the November elections. Crypto super PACs are threatening to spend in Brown’s Ohio race. “I suspect, because Sherrod’s in a tough reelect, that he’s kinda frozen,” said Sen. Cynthia Lummis, a Wyoming Republican who is the Senate’s top crypto proponent. “I think there will be very little boat-rocking going on.” It’s Thursday — Send tips to zwarmbrodt@politico.com and stay in touch with Jasper at jgoodman@politico.com and @jasper_goodman.
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