Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our s each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. House Republicans just made history. Late Wednesday, the House Financial Services Committee approved — for the first time ever — landmark legislation that would start to construct a federal regulatory regime for cryptocurrency. Financial Services Chair Patrick McHenry and a top deputy, Rep. French Hill, even brought along six Democrats, despite opposition from their committee leader, Rep. Maxine Waters. The bill the committee approved in a 35-15 vote would give explicit digital asset powers to the SEC but also impose new limits on the agency, which is fighting several crypto legal battles using laws enacted long before the Bitcoin boom. A parallel bill, which the House Agriculture Committee is set to approve later today, would give the CFTC sweeping new authority over crypto trading. The vote marks a watershed moment for the crypto lobby, which backed the plan and showed that it still has some influence despite the view of many lawmakers that its products have little societal worth. As my colleague Eleanor Mueller covers here, the markup followed weeks of work by McHenry and Hill, who agreed to incorporate several changes from interested Democrats in a bid to make the plan a little less of a longshot. On Wednesday, they framed the legislation as an effort to fill in regulatory gaps. “I remind my colleagues that joint stock companies were once an innovation that some claimed were only used to facilitate fraud,” McHenry said, later describing the bill as “better at worst case than what we have currently.” Rep. Jim Himes, a Connecticut Democrat, had in recent weeks left open the possibility of backing the bill but on Wednesday made an unexpectedly impassioned case for it, after Waters blasted it as “a wish list of Big Crypto.” Himes described the status quo of crypto regulation in the U.S. as having an “utter lack of transparency” and being “total chaos,” with crypto firms, regulators and the courts at odds over how the market should operate. “Are we comfortable walking away having done nothing?” he said. “The status quo is this: $2 trillion in value lost in the crypto asset markets. $2 trillion evaporated in what is a Wild West. An FTX collapse, which might have been prevented by this legislation, that devastated smart and dumb money alike. We don’t want to see another FTX collapse.” McHenry’s next big test is whether he can convince Waters and other Democrats to back a narrower bill to regulate stablecoins, a digital token backed by assets like the U.S. dollar. Supporters say the technology can help improve payments but regulators see big risks and a need for more oversight. McHenry on Wednesday night left open the possibility of punting Thursday’s planned stablecoin vote to September, as talks continued with Waters, the Biden administration and other committee members. As Eleanor reports, the Federal Reserve and the New York Department of Financial Services are also weighing in on what kind of federal-state balance of power will be in the bill. It’s Thursday — MM wants your reaction to the bank capital rules coming out today. Please direct them to zwarmbrodt@politico.com.
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