With House Speaker Kevin McCarthy (R-Calif.) slated to meet today with President Biden, Washington is fully immersed in debt ceiling drama. In fact, this week 24 Senate Republicans signed a letter telling President Joe Biden they will oppose a debt limit increase that does not come with spending cuts. While it’s difficult to see a path forward on that crucial issue, there actually are matters on which the two political parties could come together this year to enact bipartisan legislative successes.
And many of those matters could have long-reaching impacts for the financial services and technology industries.
Let’s take a look.
Digital Asset Legislation Is Coming
In mid-December, FTX founder and former CEO Sam Bankman-Fried was indicted by the U.S. Attorney of the Southern District of New York on eight criminal charges including wire fraud and conspiracy. The indictment followed a parallel action by the Securities and Exchange Commission and the Commodity Futures Trading Commission charging Bankman-Fried with defrauding investors.
It would be a massive understatement to say that both Republicans and Democrats on Capitol Hill are eager to make sure this type of fraud never happens again.
The last Congress closed with several hearings on crypto, and the day after Bankman-Fried’s arrest, Senate Banking Committee Chair Sherrod Brown (D-Ohio) suggested that the new Congress would look at existing banking and securities laws for time-tested approaches as a way of overseeing digital assets.
There are already signs that the effort to regulate digital assets has strong bipartisan support. For example: Sens. Elizabeth Warren (D-Mass.) and Roger Marshall (R-Kan.), two senators who agree on virtually nothing, have pledged to introduce a bill to address the national security risks posed by crypto and other digital assets. The proposed legislation would close loopholes in anti-money-laundering rules and help counter terrorism financing.
On the House side, Parker Hamilton Poling, who was once chief of staff for Rep. Patrick McHenry (R-N.C.), the new chair of the House Financial Services Committee (HFSC) told CoinDesk, that Chair McHenry is “very eager to engage” with Democrats on crypto issues and to find common ground with Senate Banking Committee Chair Brown. Sheila Warren, CEO of the Crypto Council for Innovation, agreed. She told CoinDesk she thinks this will be the “Crypto Congress” since the industry’s need for oversight “hits the trifecta of interest, understanding and urgency with lawmakers.”
Warren concluded, “Crypto will become an unavoidable issue for members of Congress, and when it comes to crypto policy there is something for everyone.”
Of course, Chair McHenry already has taken action on this issue, creating the Subcommittee on Digital Assets, Financial Technology and Inclusion, a new panel on the HFSC that Rep. French Hill (R-Ark.) will chair.
Rep. Hill told Forbes this week that his priorities include:
Providing clear rules among federal regulators for digital assets;
Developing policies that promote financial technology reaching underserved communities; and
Identifying best practices and policies to strengthen diversity and inclusion in the digital-assets industry.
Rep. Hill said, “As a legal matter, Congress should set clear rules of the road so that companies know what they must do to operate and innovate effectively and legally in the United States. … I will lead the subcommittee in creating a regulatory and legal framework for digital assets, including digital payments, that protects consumers and investors, while keeping America as the leader in fintech and blockchain innovation.”
The Outlook for Data Privacy
Amidst a flurry of activity last year in the leadup to the 2022 elections, the previous Congress made significant strides on data privacy. On a bipartisan vote last summer, the House Energy and Commerce Committee approved the American Data Privacy and Protection Act (ADPPA), which, if passed by Congress and signed into law, would create a comprehensive national privacy law aimed at protecting consumer data and prohibiting discrimination based on that data.
A wide range of lawmakers and ideological groups supported the legislation, including the centrist New Democrat Coalition (NDC), which announced support for the bill last fall. At the time, Rep. Suzan DelBene (D-WA), NDC chair, said the bill was “a big step forward in our effort to ensure all Americans have strong data privacy and security protections under federal law.”
R Street Institute Policy Director Brandon Pugh said The ADPPA may not be the perfect bill, but that “it remains the best chance to make federal privacy legislation a reality.” He advised policymakers to “focus on the benefits that would result and the need for compromise to continue to move the ADPPA forward … Our data privacy and security depend on it.” Scholars from the Libertarian think tank the Cato Institute also have argued for federal action, arguing that, without it, “consumers and businesses may instead be dealing with a messy set of regulations.”
The last Congress ran out of time, however, and the ADPPA never made it to a full House vote, much less to President Joe Biden’s desk.
The legislation has not yet been reintroduced in this current Congress, but Rep. Cathy McMorris Rodgers (R-Wash.), the new chair of the House Energy and Commerce Committee, is expected to take point on this legislation this session. At a recent R Street Institute event, Tim Kurth, is Rep. McMorris Rodgers’ chief counsel on data privacy, reportedly stressed the importance of passing a bipartisan bill, calling it “one of the most American of initiatives right now” and pledging that his boss is ready to focus on educating new members on the importance of getting data privacy legislation to the finish line this Congress.
A federal data privacy framework could therefore become a reality within the next two years.
The Outlook for Antitrust
On a third issue that could impact the broader technology industry — antitrust — the potential for bipartisan action is far less certain. In fact, at the outset of the new Congress, The Washington Post said, “With Republicans taking over the House, a vast majority of the tech antitrust proposals introduced in recent years by a bipartisan group of lawmakers appear to be dead on arrival.” Speaker McCarthy himself is a strong opponent of broad antitrust legislation.
Republicans’ recent announcement that Rep. Tom Massie (R-Ky.) will chair the House Judiciary Committee’s antitrust panel all but proves The Post’s assessment.
As Bloomberg reported, Rep. Massie falls on the Libertarian side of the Republican party and, as such, is far less likely to support giving the federal agencies broad regulatory powers. Bloomberg also noted Rep. Massie’s “appointment was a snub to Colorado Republican Ken Buck, one of the main House GOP critics of big tech companies, who was the panel’s ranking member in the last Congress.”
Despite not winning the seat as chair, Rep. Buck told Bloomberg he will continue to push for legislation like the American Innovation and Choice Online Act, which would give federal antitrust agencies the authority to issue civil penalties and injunctions against the country’s largest online platforms. He also said he would support legislation to crack down on Google’s alleged monopoly in online advertising.
While The Post and Bloomberg’s analysis that the 118th Congress will be light on antitrust might be true regarding sweeping broad reform legislation, The Post said it is possible “advocates will be able to find common ground with Republican leaders on more targeted proposals, including around app store restrictions.”
And Republicans do want some action on this issue — it is just action unlikely to find support in Democratic quarters.
In a memo released last month, House Judiciary Committee Chair Jim Jordan (R-Ohio), who, like Rep. Massie and Speaker McCarthy does not support a broad antitrust bill, outlined the GOP’s antitrust agenda. Republicans’ plan is to accelerate “overdue antitrust scrutiny” by unleashing “laws already on the books … to break up Big Tech.” Specifically, the GOP wants to:
Expedite trial court consideration of antitrust cases against Big Tech companies;
Provide for a direct appeal of antitrust cases to the Supreme Court and require the Supreme Court to act quickly when these cases get there;
Subject Big Tech to legal accountability for its censorship and create a statutory basis for Americans to directly challenge Big Tech in court for censorship claims;
Reform Section 230 of the Communications Decency Act, which Republicans say Big Tech has exploited to make subjective content moderation decisions; and
Consolidate antitrust enforcement authority within the Department of Justice, thereby eliminating the Federal Trade Commission’s (FTC) authority in this area.
Which brings us to the root of Republican leaders’ opposition to the type of bipartisan legislation we saw during the last Congress.
One reason many Republicans are unlikely to sign onto a more sweeping antitrust bill is that they do not want to give current FTC Chair Lina Khan more power. In fact, Rep. Jordan’s memo argued, “The current system of splitting antitrust enforcement between the Department of Justice and the Federal Trade Commission is inefficient and counterproductive.” Additionally, in 2021, Chair Jordan argued Khan had “abandoned long-standing bipartisan practices and made it clear she will use the FTC to advance President Biden’s agenda in the name of economic ‘inequality’ and socialism.” The congressman also called Khan’s policies “radical and partisan.”
So, although legislation on antitrust is unlikely to advance over the next two years, digital asset regulation and data privacy bills could quietly gain traction, even as the fight over the debt limit heats up in the months to come.