This week two U.S. Senators, Senator Maggie Hassan (D-NH) and Senator Joni Ernst (R-IA), introduced a bipartisan bill focused on the oversight of foreign country crypto mining operations. The timing of this bill is interesting. It is the second cryptocurrency related bill to be brought to the floor of Congress within the past 3 months, the Digital Asset Market Structure and Investor Protection Act was the first, introduced on July 28th.
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What’s in the Bill?
This bill authorizes the Secretary of the Treasury to consult with the Board of Governors of the Federal Reserve System, the Office of the Director of National Intelligence, the Attorney General, and other parties to submit reports to Congress on how cryptocurrencies are being used, mined, and leveraged in foreign countries.
These reports may include:
- Foreign country cryptocurrency mining laws and regulations
- Lists of the largest State and private users and miners of cryptocurrency
- How foreign countries can be strengthened or undermined by the use or mining of cryptocurrency within their borders
- Total amount of cryptocurrency mined in foreign countries for fiscal years 2016-2022
- An analysis of cryptocurrency related hardware supply chains
- How cryptocurrency mining operations are impacting supply chains
Why does this matter? The good.
In contrast to the Digital Asset Market Structure and Investor Protection Act (crypto regulation bill) brought to the congressional floor at the end of July, this bill takes a softer research focused approach and does not make any declarations (i.e. classifying miners as brokers).
This bill could be a result of recent pro-cryptocurrency lobbying efforts. Senator Hassan told Congress, “In order to strengthen U.S. competitiveness, our government must get a better handle on the role that cryptocurrency is playing in the global economy and how it is being leveraged by other countries”. Notice Senator Hassan’s language “In order to strengthen U.S. competitiveness”, while the Chinese government has cracked down on mining with a ban, U.S. lawmakers have taken the first step towards developing regulatory guidance for crypto miners.
In addition, language in the bill includes identifying “policies that foreign countries have adopted to encourage virtual currency use and mining”. This opens the door for Congress to explore crypto mining related incentives in addition to providing general regulatory guidance. If pursued, this will encourage domestic miners to scale up production and encourage foreign miners to relocate to the United States.
Potential red flags. The bad.
This bill can also be read as an attempt to further expand the U.S. Surveillance state and implement financial controls. It is no secret that the United States exerts its influence across the globe. The bill explicitly mentions that the Treasury, along with other federal agencies intend to compile lists of the largest foreign miners as well as analyze how countries can be undermined by allowing the use and mining of crypto within their borders. The Board of Governors of the Federal Reserve System and the Office of the Director of National Intelligence are listed as collaborators for these reports.
Both of these parties have incentives to maintain the status quo: the U.S. dollar’s status as world reserve currency. Cryptocurrency mining and the use of mined coins gives foreign countries the option to circumvent U.S. hegemony by building parallel circular economies. In fact, Iran has already done this in response to U.S. financial sanctions placed on the country. It is possible that the U.S. Treasury and its partners want to monitor foreign mining operations in an attempt to preserve their influence and discourage foreign nations from using crypto in par with the U.S. dollar.
It’s also important to note that Senator Hassan, co-author of the bill, is a crypto skeptic. She has previously requested that federal agencies investigate the use of cryptocurrency by criminals, namely hackers. (Read more)
The bottom line
Many bills are written to allow lawmakers flexibility in enforcement and interpretation. It is too early to say whether or not this bill is a positive or negative for domestic and foreign crypto miners and holders. However, this bill legitimizes cryptocurrencies' role in the global economy and recognizes that foreign countries see crypto mining as infrastructure.