Encryption Bill Stumbles: "Crypto Week" Unexpectedly Falls Flat

This week was originally seen as a critical moment for the encryption industry in Washington, but it encountered a major setback on Tuesday. Three highly anticipated encryption regulatory bills unexpectedly failed in procedural voting.

The voting results show 196 votes in favor and 223 votes against. 13 Republican representatives teamed up with Democrats to block the procedural motion for debating and advancing this proposed legislation. This means that, unless the House again passes the relevant rules of procedure, these bills, which carry the hopes of the industry, will not be able to enter substantive debate.

At the beginning of this week, the sentiment in the encryption industry in Washington was high, with widespread expectations that these bills would pass smoothly. Some politicians also rallied on social media for "Crypto Week," portraying it as a key step for the U.S. to become the "undisputed, number one leader" in the digital asset space.

The "package" of cryptocurrency legislation that has been stalled this time includes three bills that are crucial to the industry:

1. Legislation on stablecoin regulation: This bill received some support from Democrats in the Senate last month and was successfully passed. It aims to provide a clear regulatory framework for stablecoins and is seen as key to unlocking broader institutional adoption.

2. Digital Asset Classification Rule Bill: This bill aims to clarify the classification rules for digital assets, specifying which assets should be regulated as securities by the U.S. Securities and Exchange Commission (SEC) and which should be regulated as commodities by the Commodity Futures Trading Commission (CFTC), in order to eliminate the "regulatory gray area" that has long plagued the industry.

3. Central Bank Digital Currency (CBDC) Bill: This proposal aims to prohibit the Federal Reserve from creating a central bank digital currency, reflecting some lawmakers' concerns about government control over digital currency.

These bills are seen as the cornerstone of the United States establishing a comprehensive and predictable regulatory framework in the field of digital assets, which could bring much-needed certainty to the market, attracting more capital and innovation.

The most striking aspect of this vote was undoubtedly the "defection" of 13 Republican congressmen. Reports indicate that several Republican congressmen, including Marjorie Taylor Greene, Chip Roy, Michael Cloud, and Anna Paulina Luna, cast votes against.

Marjorie Taylor Greene from Georgia publicly explained her position on social media. She stated that the bill failed to include a ban on central bank digital currencies (CBDC), and Speaker Johnson did not allow related amendments to be submitted. Greene emphasized that Congress must also include a CBDC ban in the bill, as she believes "Americans do not need a government-controlled central bank digital currency."

House Speaker Johnson is thus caught in a dilemma. After the failed vote, he stated that Republicans "are still in conversation, answering questions," trying to appease and win the support of these conservatives. However, he also admitted that bundling all three bills into one "big package" is unfeasible, with a senior Republican saying bluntly: "A packaged vote will only cause these bills to fail in the Senate." These remarks reflect the strategic dilemma faced by Republican leadership in balancing the demands of different factions within the party and ensuring legislative feasibility.

After the news of the failed vote was announced, stocks related to encryption fell sharply: the stock price of a certain stablecoin issuer dropped by more than 7%, a certain cryptocurrency exchange fell by over 4%, and the stock price of a certain digital asset company also dropped by 2%.

House Speaker Johnson has announced plans to restart procedural votes on the encryption bill on Wednesday local time. The Louisiana Republican told reporters as he left the Capitol that the party is still in "ongoing communication to address members' concerns" and emphasized that "these encryption bills are a shared priority of the White House, the Senate, and the House."

Even so, some industry analysts remain optimistic about the future of the bill. A policy analyst noted in a report to clients: "We are likely to vote on the rules in the House again tomorrow (Wednesday). If that does not happen tomorrow, it may be postponed until next week." He further stated that he still expects the House to pass the bill.

The CEO of a certain industry organization is also confident about the final passage of the bill. He pointed out on social media that the best way to address the ban on CBDCs is through this bill: "If lawmakers are interested in banning CBDCs and competing with digital currencies issued by other countries, then the way to do this is through the bill and allowing the private stablecoin market to thrive in the U.S."

This setback confirms a reality: in Washington, even the most high-profile agenda can succumb to the subtle power balance within the party. When technological innovation meets political gamesmanship, the "compliance path" for encryption is destined to be bumpy.