A rift over US crypto policy deepens as Democratic lawmakers walk out of a joint hearing

California's Maxine Waters, the top Democrat on the House Financial Services Committee, said she would not provide the support needed for the hearing to move forward

A rift over US crypto policy deepened on Tuesday as several Democratic lawmakers walked out of a joint hearing between the House Financial Services and Agriculture committees.

California’s Maxine Waters, the top Democrat on the House Financial Services Committee, said she would not provide the support needed for the hearing to move forward “because of the corruption of the President of the United States and his ownership of crypto.”

The family of President Donald Trump has dived headlong into crypto over the past several months, launching or supporting a stablecoin, a Bitcoin mining operation, and memecoins, even as the president pushes for industry-friendly regulation that would likely benefit those businesses.

Last month, the company behind Trump’s memecoin said its top 220 investors would be invited to a “gala dinner” at the Trump National Golf Club near Washington, DC. The announcement sent the token’s price soaring and prompted Democratic senators to call for Trump’s impeachment and for an investigation into potential “‘pay-to-play’ corruption.”

Trump’s crypto embrace has rocked congressional debate over crypto policy. Last month, Representative French Hill, a Republican from Arkansas, told reporters that Trump’s myriad crypto ventures “complicated” lawmakers’ work to pass stablecoin legislation.

“Whether it’s a commodity or security, what have you, we can work that out,” Waters said on Tuesday.

“What I cannot work out is Trump’s corruption. We just can’t walk away from that. We’ve got to have guard rails.”

Market structure ‘roundtable’

Republicans unveiled draft legislation on Monday that would create a framework for digital asset regulation, placing most cryptocurrencies under the purview of the Commodity Futures Trading Commission, rather than the Securities and Exchange Commission.

Tuesday’s joint hearing was intended to give lawmakers an opportunity to discuss the bill and question industry experts.

But joint hearings require lawmakers’ unanimous consent. Waters said she would not provide that consent, and left the hearing to lead a competing discussion on crypto policy featuring a slate of experts critical of the industry.

Republicans pressed forward, rebranding the hearing as a “roundtable.”

“A rose by any other name smells just as sweet,” Dusty Johnson, a Republican from South Dakota, said.

Industry representatives invited to speak with lawmakers pleaded for the passage of a so-called market structure bill that would rescue crypto assets from their legal limbo.

“It’s not the case that digital asset issuers refuse to comply with the law,” James Rathmell, general counsel at crypto venture capital firm Haun Ventures, said.

“Our industry has tried every single pathway available under existing securities laws to conduct a token offering. But a core reality remains: Protocols depend on liquid markets, price discovery, community participation, and disintermediation. Existing law simply doesn’t contemplate this.”

Republicans were receptive to the message.

“The digital asset ecosystem in America is operating under a reign of terror, as I think each one of your testimonies has pointed out,” Mark Messmer, a Republican from Indiana, said.

“It’s ironic, because the heavy blanket of regulations, litigation that are meant to protect consumers is suffocating the very innovation that can improve safety.”

Waters’ hearing

But the few remaining Democrats attempted to steer the conversation back toward Trump’s crypto empire.

“If we’re successful in working together, then legitimate enterprises will innovate and thrive, and consumers and retail investors will be protected,” Angie Craig, a Democrat from Minnesota, said.

But lawmakers shouldn’t shy away from Trump’s apparent conflicts of interest, Craig added.

“It’s corrupt, it’s wrong, and it makes this process of coming together to regulate crypto more partisan than it needs to be,” she said.

At Waters’ competing meeting, meanwhile, experts slammed the Republican-led market structure bill unveiled Monday.

“Congress is pushing the FIT21 2.0 bill, which would let crypto firms self-certificate their tokens as decentralised, stripping away SEC oversight,” Chastity Murphy, a research fellow at the University of Manchester, said.

“Rules and referees are necessary to prevent crashes and corruption. Crypto should not be an exception.”

Waters on Tuesday released draft legislation that would ban the president, vice president, members of Congress, and members of their immediate family from owning crypto assets, serving an an officer or director at a crypto issuer, and receive any financial benefit from issuing or promoting crypto assets.

Aleks Gilbert is DL News’ New York-based DeFi correspondent. You can contact him at aleks@dlnews.com.