Congress says no to state-sponsored crypto

The House of Representatives passed three key bills on Thursday aimed at overhauling the regulatory framework for cryptocurrency—with the promise that the United States will stay far away from any kind of state-sponsored digital money in the future.

Rep. Tom Emmer, R-Minn., the House GOP whip, announced that this year’s defense authorization legislation would include a prohibition against central backed digital currencies (CBDCs).

“Attaching our anti-CBDC surveillance State Act to the [National Defense Authorization Act] will ensure unelected bureaucrats are never allowed to trade Americans’ financial privacy for a CCP-style surveillance tool,” Emmer said in a statement, referencing the Chinese Communist Party and the country’s centralized digital currency.

It’s a promise small government advocates are banking on.

The three bills passed on Thursday represent Congress’ first real effort to enact some form of framework for how financial regulators interact with virtual assets. It also marks another key win for House Speaker Mike Johnson, R-La., who overcame an eight-hour standoff on Wednesday evening with as many as nine holdouts demanding Congress do more to prevent the future creation of a CBDC.

The first bill, the Anti CBDC Surveillance Act, would prohibit the federal government from creating a state-sponsored digital asset. The second, the Digital Asset Market Clarity Act (or CLARITY Act), creates a regulatory framework for how the Federal Trade Commission would regulate digital assets.

The picture grew complicated with the addition of the GENIUS Act—a Senate-led piece of legislation that already passed in the upper chamber in a 68-30 vote last month.

The GENIUS Act would create requirements for the issuance of payment stablecoins, types of cryptocurrencies that achieve price stability by tying their value to the U.S. dollar or some other liquid asset.

With some exceptions for smaller startups, the bill would require issuers of a new coin to be either federally approved, state approved, or a subsidiary of an institution backed by the government’s bank regulators. The bill also requires issuers to maintain the asset’s value through reserves.

Rep. Eric Burlison, R-Mo., said he broadly supports Congress’ work on cryptocurrency. But along with concerns that some of the new language might be a little too restrictive, he expressed alarm that the GENIUS Act didn’t explicitly remove the possibility of centralized digital currency in the future. That bill is likely to become law soon since it already passed in the Senate, while the Anti CBDC Surveillance Act, which would explicitly ban centralized digital currency, has only passed in the House so far. Burlison was one of the 12 Republicans to vote against the GENIUS Act.

“When we look at what China is doing to control its population by controlling their currency—I mean, if you put that in the hands of politicians, it would be awful,” Burlison said.

Rep. Tim Burchett, R-Tenn., was one of the Republicans who held up consideration of all three bills for more than eight hours on Wednesday evening. On Thursday, he supported the measures after receiving commitments from leaders and the president that the language against CBDCs would make it into the National Defense Authorization Act—a piece of legislation that’s reliably expected to pass every year.

“I’d be pretty frustrated,” Burchett said when asked what his reaction would be if the agreement fell through. “I would think we were misled by our leadership, so we will see. I’ve been disappointed by them before.”

“The president assured us he would help us on that,” Burchett added.

With the agreement in place, Republicans rallied around the three bills, which passed with bipartisan support. The Anti-CBDC Surveillance Act passed 219-210. The GENIUS Act passed 308-122, and the CLARITY Act was approved in a 294-134 vote.

Rep. Warren Davidson, R-Ohio, believes that if the government had implemented the changes included in these bills a few years ago, they would have prevented misuses like the demise of the FTX trading platform. That company, founded by Sam Bankman-Fried, vaporized billions of dollars’ worth of investments when it became clear it had misrepresented its services.

In his view, they offer basic levels of clarity, like what is—and what isn’t—a security, or tradeable asset.

“There’s a company in Ohio that’s token-izing car titles,” Davidson said, referring to the legal document outlining ownership of a vehicle. “If you’ve ever bought a car and you pay for the title, the title goes all over the place, or if you buy it directly, the title takes weeks so you can get the plates. They’re trying to change that and just make it a digital token.”

Davidson explained that car titles are clearly not a form of security and therefore wouldn’t be subject to federal regulation. This bill, Davidson explained, sets clear terms for murky areas that have evaded federal oversight for years.

“A lot of meme coins are effectively just pump and dump scams, right? And the SEC hasn’t taken action against those things,” Davidson said.

Davidson was the first member of the House of Representatives to introduce legislation defining cryptocurrencies as securities back in 2018.

The GENIUS Act, having cleared both chambers, now heads to the desk of President Donald Trump for his signature. The CLARITY Act, the bill laying out the FTC’s role in cryptocurrencies, and the standalone prohibition against CBDCs will make their way to the Senate for consideration.