Signal boosting this excellent and super-detailed analysis of the Senate market structure discussion draft released yesterday by the inimitable @JBSDC. Look for our full write-up and comparison with CLARITY coming soon to a X account near you! 🔥🔥🔥

35 pages only. Well this will be a fast analysis. I’ll just hit the highlights.

Condolences to those in DC who thought the banks would be some excellent ally or bulwark against crypto, especially those who spent the years 2008-2020 fighting the banks. Truly an act of strategic genius there.

Thrilled! GENIUS is a first step in a long journey, but that’s how journeys go. The next step is perhaps the biggest … market structure legislation. I believe it can and will happen soon. Here’s to all those who got us this far and to those who will take us the rest of the way.

RT @millercwl: MASSIVE bipartisan supermajorities advance CLARITY to the Senate and GENIUS to the President’s desk. Thank you to all the…

A bunch of geniuses

She's a liar, CLARITY does not say or do this

Currently, there is a bit of chaos in the House of Representatives around the Genius, Clarity, and anti-CBDC bills that are passing through Congress. I wanted to take a moment to frame both what is at stake and some of the moving parts here, and what the optimal path forward is for most of the parties getting most of what they want (as always, a good negotiation will leave some people unhappy about some things). Those who know me know that I am a big advocate for stablecoins, and I’ll try to explain why as I explore this. Some might also think that I am simply a crypto booster, or alternatively, just politically motivated. You might even think I hate crypto (if you are some of the permissionless maxis in crypto). I find it ironic I tend to catch slings and arrows from both sides on this topic, but I have tried to put aside any political leanings here and certainly I’m not trying to do favors for the crypto industry (as many will disagree with parts of what I am about to say). So first, what is at stake? Genius has already passed the Senate, meaning that if it is passed, it ends up on President Trump’s desk. That’s not a small thing! On the other hand, Clarity and the anti-CBDC bill have not passed the Senate, and to hint and some of what I have to say later, I do not think if they pass they are moving this week, or even during the summer, in the Senate. So there, we are playing the long game to create things that will be the basis for future work by the Senate exactly like how the work that many individuals in the House, ranging from previous chairs McHenry and Waters, to Democrats like Ritchie Torres and Wiley Nickel, to Republicans like Warren Davidson and Mike Flood, lead to the Genius bill. With that state of play, I would first suggest the single most important thing that could happen is moving Genius. That is live! It’s something that could become legislation as soon as possible, and it’s critical that we move that and get it right for America rather than get stuck in the mud. Why? 1 - The rest of the world has noticed America has woken up on crypto. Did you know that China has begun reviving their own stablecoin projects? That regulatory frameworks are moving in Hong Kong? That various pieces are being put in place to compete on a global level? If the United States fumbles the ball at the 1 yard line, right before we were poised to win the game, by not passing this legislation, we are going to give other countries the chance to steal the future of the financial system from us. Putting everything else aside, if you are an American, Republican or Democrat, this is probably something you can agree is mission essential from a national and economic security perspective. We have to get this done. It’s not just China, either. Christine Lagarde and the EU are increasingly coming out pushing the digital Euro as a competitor to stablecoins. Everyone is awake now. We can’t stay asleep when the game has started. 2 - If you are opposed to CBDCs and state control of financial rails, the best way to compete against this in the long run is not legislation. It is the private market. America does not have a government-run AI company, nor does America have a government run set of grocery stores. Yet we have some of the best tech companies, supply chain and logistics firms, and overall economic outcomes anywhere, bar none. Why is that? The private sector. To paraphrase many market economists, and referencing the recent economic miracle occurring in Argentina under Javier Milei, the best thing we can do as government is sometimes to get out of the way. I certainly, as a long-time banker, believe that here. In fact, the root of many financial crises and problems we’ve had in the US starts with government intervention into markets (mortgages and student loans, anyone?). Less is sometimes more. 3 - Equally so, if you are worried about a CBDC, we aren’t starting in a vacuum. I testified earlier this year for the investigations subcommittee of House Financial Servies (thank you again for the opportunity, chairman Meuser, and for taking the reforms I proposed seriously). The current banking regulatory framework is not great. Consumers and businesses can be abused behind closed doors by our regulators, locked into unfair economic agreements, and the third party doctrine is sweeping up huge amounts of information. In some ways, we already have the surveillance part of a CBDC. Thus, if you want to fight that battle, I would suggest banking regulatory reform and reform of the third party doctrine would be the hill (no pun intended, chairman) to die on, not the one of banning a potential future CBDC that… would have the properties our current system already has? Let us reform what exists so future generations receive a financial system that cannot be abused by any political party! That’s the right battle. 4 - Finally, stablecoins are simply better for consumers. If you accept you’re not going to get paid yield on deposits, would you prefer that the underlying entity take a ton of risk lending to commercial real estate billionaires to pay themselves huge bonuses, or that it would just buy t-bills and go home? Banks do the former. Stablecoins do the latter. It is hugely pro-worker and beneficial to the average American in places like Ohio, Mississippi, Arizona, Idaho, and Oregon to move stablecoins. The only losers will be the rich bankers. Now, moving to the tactical reality of politics: Clarity is not going to move quickly in the Senate. The educational effort there will be significant (as staffers on both sides of the aisle have told me). The concerns about the bill are material. Some are largely unexplored, like the potential regulatory arbitrage issues when you start tokenizing many existing exotic financial products in ways that might fit some truly shocking things into “decentralized” frameworks, and let me assure you that absolutely nobody is going to be happy if the big winner of Clarity are desks like my old desk at JPM when they figure out how to decentralized and automate really bizarre stuff like mortality swaps to dump huge amounts of that risk on retail investors. It’s not perfect. It is a really good first draft and effort, and I salute both the crypto firms (like Coinbase and a16z) and legislators and staff (America overall owes a debt of gratitude to Allison and Paul, and yet the supermajority of Americans will never know who they are). However, this is not a time to let perfect be the enemy of good in legislative terms. Moving Clarity, with or without the anti-CBDC provisions, is not going to turn it to law. It’s going to hit the Senate, require a ton of work, and may or may not eventually move there. The dynamics are totally different when you are going down dais in the Senate banking committee and trying to coordinate with the ag committee as well to get enough votes on both sides to move something. It’s going to be hard. It’s going to be complicated. Lastly, craftsmanship matters. The current anti-CBDC bill I think is incredibly well-intentioned (I am very much against super-surveillance currencies, and I’ve also spoken publicly in the past about my doubts around the constitutionality of the BSA in a world with ubiquitous electronic records and the third party doctrine, as that seems like an end run around constitutional rights), but it mechanically has problems. My read of the current legislation indicates it might ban the current electronic ledger of the Fed, which sounds fun until you realize that could brick Fedwire, ACH, and thus trap a bunch of money in banks. That’s not great! Which is not say we shouldn’t be trying to move something, but it is to say conditioning the passage of Genius, specifically, on moving that would be a crippling mistake and is the kind of thing that China is praying the US gov’t stumbles on. So let’s not do that. Move Genius, that’s important for America, across all people. Do it now, so the calendar does not also become an enemy, and so our geopolitical adversaries cannot claim the upper hand while we dither. Clarity and the anti-CBDC bill matter, but they are not immediately actionable matters critical to national security in the same way. There should and can be compromise or future debate on those (apologies to those who wished to combine them, but the political reality of the Senate makes that impossible), but it’s not worth nuking the greatest expansion of the dollar and human rights of the past 40 years to quibble about niche securities esoterica. In fact, I will go one step further. I've met all of @WarrenDavidson @ElectFrench @BryanSteil in person. Americans have this caricature that politicians are mustache twirling villains, but they are not. Every single one treated me with respect, has thought deeply about these issues, and is trying to get the right things done for America and their constituents and supporters. But also, having meet all of them, I'm certain they can get in a room and get this done, as it will be legacy defining for everyone involved to get it right.

I will be testifying before Ways & Means tomorrow on the tax treatment of crypto. Some are saying it will be the highlight of Crypto Week. But it’s also @swimNVSL divisionals week and @TheOpen week so I understand if attention is divided. Bit of a scheduling war.🏊‍♂️⛳

1/ Good afternoon from D.C. – and welcome to Crypto Week on Capitol Hill! Here's what to expect as Congress prepares to vote on three landmark crypto bills – and why this is the biggest week yet for digital assets in Washington. 👇