The Breakdown - Early Signs of Crypto Bipartisanship in Congress

Episode Date: March 13, 2025

Congress has followed the Senate in their vote to repeal a damaging IRS crypto broker rule, and has done so by an even bigger supermajority than the Senate vote. NLW argues that this shows an emerging strand of common-sense bipartisanship around crypto in Washington. Sponsored by: Ledger Ledger, the world leader in digital asset security, proudly sponsors The Breakdown podcast. Celebrating 10 years of protecting over 20% of the world’s crypto, Ledger ensures the security of your assets. For the best self-custody solution in the space, buy a LEDGER™ device and secure your crypto today. Buy now on Ledger.com. Enjoying this content? SUBSCRIBE to the Podcast: https://pod.link/1438693620 Watch on YouTube: https://www.youtube.com/nathanielwhittemorecrypto Subscribe to the newsletter: https://breakdown.beehiiv.com/ Join the discussion: https://discord.gg/VrKRrfKCz8 Follow on Twitter: NLW: https://twitter.com/nlw Breakdown: https://twitter.com/BreakdownNLW

Welcome back to The Breakdown with me, NLW. It's a daily podcast on macro, Bitcoin, and the big picture power shifts remaking our world. What's going on, guys? It is Wednesday, March 12th, and today we are talking about the House voting to repeal an IRS reporting rule in a further sign of progress being made for crypto in Washington. Before we get into that, however, if you are enjoying the breakdown, please go subscribe to it, give it a rating, give it a review, or if you want to dive deeper into the conversation, come join us on the Breakers Discord. You can find a link in the show notes or go to bit.ly slash breakdown pod. All right, friends, well, not much has moved in markets. Chaos Watch 2025 continues

a pace. And so instead of digging more into that and trying to get in the head of what our president is thinking and whatever strategy there may be there and what it means for Bitcoin and crypto, instead we're going to look at stuff that we can actually understand, whereas has been the case for the past several weeks, serious progress is being made. specifically, the House has voted to repeal a controversial IRS reporting rule. The Tuesday vote was the counterpart to a Senate vote that passed last week. Now, as a reminder, this was the rule that required Defi platforms to report user profits to the IRS in a similar way to a stock brokerage.

Of course, defy platforms don't have any of the information required, so the rule implied KYC, which itself implied a complete overhaul of Defi systems. And that's at best. More realistically, the rule seemed to be intended as a backdoor way to ban Defi in the U.S. due to compliance being impossible. Due to a procedural quirk, the resolution will need to go back to the Senate before it can be signed by the president, but for all intents and purposes, the rule has been repealed. Now, removing this rule is extremely important.

I don't want to understate that point. The rule had major privacy and constitutional issues, and its removal is being heavily cheered in defy circles. Still, for us and our purposes, arguably the more important point is that these votes were not close at all, each passing with a bipartisan supermajority. Last week's Senate vote passed 70 to 28, with 18 Democrats crossing the floor. That vote demonstrated enough crypto support in the Senate to defeat the filibuster and gave hope that crypto legislation has a pathway through a bitterly divided Congress.

Tuesday's House vote passed by an even more significant margin. 292 representatives voted for the bill, including every Republican and 76 Democrats. That's compared to 131 Democrats that were opposed. Ron Hammond, the Senior Director of Government Relations at the Blockchain Association, wrote, Most bipartisan crypto House vote yet. Jake Jivinsky, the chief legal officer at Varian Fund, commented, 76 congressional Democrats voted yes. The anti-crypto army is defeated. One subplot is that only eight of 16 Democrat members of the House Financial Services Committee voted to repeal the rule, which could mean that crypto bills in the future will still

have a tough time getting through at the committee stage. However, this resolution could have passed without bipartisan support, so Democrats voting in favor were doing it purely to signal their position on the issue. Moving legislation, through Congress is difficult at the best of times. And glancing around at the acrimony on display in Washington at the moment, it's clear that this is far from the best of times. Still, this vote demonstrates that there is no appetite for getting in the way of passing sensible crypto policy. Kristen Smith, CEO of Blockchain Association, called this another encouraging sign of a new era for crypto in Washington. She added, true bipartisanship is at times rare in Washington, but today is a signal that

there is agreement on both sides of the aisle that the American defy and crypto industry deserves to grow and thrive here in America. More simply, Taylor Barr, the head of government affairs at the digital chamber commented, this is what a pro-crypto-counters looks like. The next piece of legislation that Congress will tackle cover stablecoin policy, and it seems like momentum is building. The House Financial Services Committee debated the bill in a hearing on Tuesday. The committee heard from experts in the industry, including the CEOs of Stripe and Paxos, as well as the head of digital assets at BNYMellon. During the hearing, Representative Bill Heisinga said, there is a moment for us here in Congress now to act, and as legislators, it's ultimately up to us to provide the regulatory clarity

needed to ensure that the U.S. dollar remains the dominant reserve currency, and I believe stable coins can do that. Pro-Crypto Democrat Richie Torres had even more pointed commentary, stating the proper legislative response to the automobile is not to ban it, it's not to sabotage it, it's to regulate it, it's to make it safer. And as far as I'm concerned, the proper role of Congress is not to sabotage digital asset transactions, but to make them safer, to strike a careful balance between financial stability and innovation. Democrat ranking member Maxine Waters used her time to criticize Trump's meme coin rather than engage in the policy discussion at hand, which to some extent is an admission of failure, or at least an admission that you don't really

have any strong opposition to the thing that's actually being debated. Over in the Senate, another updated version of a stable coin bill has been introduced, with co-sponsor Senator Kirsten Jilibrand writing, the updated version of the Genius Act makes significant improvements to a number of important provisions, including consumer protections, authorized stablecoin issuers, risk mitigation, state pathways, insolvency, transparency, and more. Dom Kwok, the founder of Web3 Learning Platform EasyA, read the updates and noted very tough compliance rules for foreign issuers. He commented, most foreign issuers will find these standards hard to meet, giving U.S.

issued stablecoins a competitive advantage. I think whatever you think of this one way or another, it seems very in keeping with the tenor in times in Washington right now for that advantage to be met it out. The Senate version of the bill will go to a markup hearing on Thursday. This will allow amendments to be debated on and certify the bill for a floor vote. Hello, friends. I am thrilled to share that Ledger is once again partnering and sponsoring with the breakdown. Many of you know, but for those of you who don't, Ledger is the most secure hardware wallet for your crypto and logins. It's trusted by 7 million users and

secures 20% of the world's digital assets. What's more, Ledger is a lot more than wallets. Over the recent years, they've built a comprehensive ecosystem of products and services, all of which are designed to make digital ownership more secure and accessible. You can buy your Bitcoin with Ledger and Ledger Live and so much more. Basically, not only did they want to keep your assets secure, they want you to be able to do more with them. Ledger's newest devices, the Ledger Stacks and Ledger Flex introduced the world's first secure touchscreens, making it easier and safer to manage your transactions and assets.

Alongside Ledger Stacks and Ledger Flex, the company also launched the Ledger Security Key app, offering a safer alternative to traditional passwords and enhancing your digital security. If you are in this space, you owe it to yourself to at least check out Ledger and their ecosystem what they have available to you. So thanks once again to Ledger for sponsoring the show. In February, Senate Banking Committee Chair Tim Scott declared that he expected both stablecoin legislation and the market structure bill to pass by May. That timeline seemed ambitious, but it looks like at least the Stablecoin bill is moving through Congress at a meaningful pace. So perhaps the crypto agenda will actually be squared away by the summer.

Ron Hammond at the Blockchain Association took the opportunity to have a little fun with the names of the twin bills. He commented, The House hearing today showed that most of the Democrats and all the Republicans largely support the measures in the Stable Act. That same bipartisan spirit will likely be reflected in Thursday's Senate banking markup of the Genius Act. This will set the stage for a comprehensive vote on the combined product, the Stable Genius Act, sometime in the next two to three months. The legislation doesn't end there, however. Cynthia Lovis has reintroduced her Bitcoin bill.

Appearing in a Bitcoin Policy Institute conference in D.C., Lema said, the momentum is in our hands and we need to make this happen. Thankfully, President Trump is with us and the opportunities are boundless. The bill was first introduced in July 2024 following the Bitcoin conference and directs the government to buy a million Bitcoin over the next five years. It purports to have a budget-neutral funding mechanism, something that was required in the executive order that established the Strategic Bitcoin Reserve. Specifically, the bill calls for the Treasury to deploy excess funds from the exchange

stabilization fund, as well as to revalue the gold reserve and reinvest the paper markup. The goal of the reserve, as stated in the bill, is to hold Bitcoin for 30 years and then use the price appreciation to pay down the national debt. Luma said that she was, quote, proud to reintroduce the landmark legislation that codifies President Trump's bold vision to establish a strategic Bitcoin reserve. She continued, by transforming the president's visionary executive action into enduring law, we can ensure that our nation will harness the full potential of digital innovation to address the national debt while maintaining our competitive edge in the global economy. Together, we are not just adapting to the future, we are actively

shaping it, writing the next chapter in America's proud history of financial innovation, and securing lasting prosperity for all our citizens. The bill has five co-sponsors in the Senate, all Republican. Nick Bejik has introduced a companion bill in the House and already managed to gather six co-sponsors as well. Far be it for me to go out on limb and actually handicap the chances of this bill goes anywhere, but the market seems to be pricing the odds right now at right around zero. And that seems like a bit of an oversight. Former hedge funder James LeVish tweeted, I think it takes longer than many hope, but I do think it has a solid chance of passing with this Congress, eventually, and perhaps with concessions through committees. One of the big things

that could shift the Overton window is if the administration starts buying Bitcoin purely based on executive order. As we all know from onboarding Bitcoin newbies, it's far easier to make your second Bitcoin purchase than your first. David Bailey, the CEO of Bitcoin magazine, commented, implementation of the Strategic Bitcoin Reserve EO is far tighter than the market anticipates. Timeline measured in days and weeks, not months or years. Also appearing at the event on Monday was Tether CEO, Paulo Arduino. He underscored that purely the announcement of the strategic reserve has been impactful, commenting, the fact that the U.S. government has acknowledged the importance of Bitcoin is incredible. I think that every other country should follow. He continued

saying that he believes that there will be a, quote, strategy that will not be too public to acquire bitcoins, then there will be a holy shit moment for every other country thinking, I'm late, I don't have enough Bitcoin. And then the next financial reset will be in Bitcoin. Now, moving across the pond, EU officials are apparently getting concerned that Trump's support of crypto could undermine European monetary sovereignty. Following a Eurogroup meeting on Monday, the European Stability Mechanisms Managing Director Pierre Grimenga said, the U.S. administration is favorable towards cryptocurrencies and especially dollar-denominated stablecoins, which may raise certain concerns in Europe.

The specific concern is that permissive U.S. regulations could lead foreign tech giants to launch global payment systems using U.S. dollar stablecoins, disrupting Europe's monetary autonomy and financial stability. Unless you think, no, no, no, that's just Europe being concerned. This is basically exactly the point that these Congress people are making when they say that this is going to increase U.S. dollar hegemony. Referencing prior statements from the ECB about crypto and pointing out the irony, Jonathan Gallia wrote, imagine your monetary sovereignty and financial stability being threatened by fake internet money. This fear of the euro losing relevance seems to be driving a push to launch the European CBDC. Earlier this week, ECB president Christine Lagarde announced,

quote, the European Union is looking to launch the digital euro by October this year. Now, at this point, the digital euro has not been all that well received and still requires legislation to be passed in the European Parliament. LaGarde attempted to address criticism, adding, we are working to ensure that the digital euro coexist with cash, addressing privacy concerns by making it pseudonymous in cash like in nature. Interestingly, when mentioning the stakeholders that need convincing, LaGard mentioned various lawmaking bodies but neglected to include the European people. Last month, the ECB's target two payment clearance system had a major outage.

making banks unable to settle payments for the better part of a day. Lawmaker Marcus Ferber of the European People's Party commented, The instance is a blow to the ECB's credibility. People will ask legitimate questions how the ECB will be able to run a digital euro when they cannot even keep their day-to-day operations running smoothly. Lots of interesting things going on in the policy direction, just a couple last little market stories to wrap up. Weak market action since February is starting to show up in the data, with Robin Hood reporting a 29% drop in crypto trading volume from the prior month. Interestingly, the data shows the platform's crypto volume to be far less sticky than stocks.

Their equity trading volume is down only 1% month over month. Part of this is likely reversion to the mean after a hot month in January around the inauguration, but it's another data point suggesting crypto markets are taking a moment to cool off. Derivatives trading venues are also a ghost town as futures open interest collapses. CryptoQuant data shows open interest for Bitcoin and Ethereum futures dropping by around 1.3 billion over the past week. That's around a third of positions from venues that CryptoQuant tracks, leading their analyst to comment, the partial market reset has been completed. Good news is that this reduction

and leverage in the system could make violent downside moves less likely in the short term. Ultimately, like I keep saying, you got to look past the markets to see the good that's happening, but once you do, it's not hard to find. I will keep you posted about everything that's going on, good, bad, and otherwise, but for now, that is going to do it for today's breakdown. Appreciate you listening as always, and until next time, be safe and take care of each other. Peace.