News Release: House-Passed Crypto Bill Risks Investor Harm and Financial Instability


May 23, 2024

Carter Doughtery

House-Passed Crypto Bill Risks Investor Harm and Financial Instability
Legislation the product of millions of industry money and false choices

Washington, DC – The cryptocurrency bill passed by dozens of House Democrats and most Republicans at the behest of a free-spending industry lobby lacks effective protections for consumers, establishes weak rules for this fraud-ridden industry and contains loopholes that could undermine regulatory safeguards for all investors and consumers.

“This bill, if enacted, would close the purported crypto regulatory gap with a wrecking ball instead of a modest patch, damaging financial regulatory safeguards for all Americans, not just crypto consumers,” said Mark Hays, senior policy analyst with Americans for Financial Reform and Demand Progress. “It should be seen not as a thoughtful piece of policy but a bill written by crypto lobbyists who have injected tens of millions of dollars into the political process and – for the moment – got the outcome they paid for.”

The influx of crypto political spending this election year – notably millions in negative ads in California’s Senate primary – loomed large in this vote. Crypto super PACs, largely financed by a handful of wealthy Silicon Valley tech donors, have pledged to spend tens or even hundreds of millions of dollars this election cycle.

A large group of public interest organizations, including labor unions, consumer and investor protection organizations and academic experts, warned strongly against the legislation before it passed.

In the lead up to the vote, crypto industry lobbyists misled lawmakers by suggesting that this bill was better than nothing – a false choice if there ever was one. State and federal regulators actually have ample existing authority to address many issues regarding crypto, and have acted effectively to hold the industry to account. Indeed, had regulators not acted, the collapse of the crypto markets in 2022 and 2023 could have spread much further.

“It’s as if pro-labor lawmakers, instead of upholding workers’ rights, endorsed a bill written by Amazon proposing a kinder version of union-busting,” said Hays. “The bill’s real aim is exemptions for crypto that hold regulators and enforcers at bay. It risks legitimizing the industry’s systemic bad practices and exposing the financial system and investors as a whole to more risk, instability and failure.”

The debate around crypto is a striking echo of the fight over derivatives regulation in the 1990s, in which Congress took a hands-off approach at the behest of a powerful industry and helped cause the 2008 financial crisis.

“Lawmakers should recognize this effort as little different from past deregulatory efforts by wealthy special interests – an infusion of cash to write their own rules, at the expense of investors, consumers and communities,” said Hays.