Editor’s note: Morning Money is a free version of POLITICO Pro Financial Services morning newsletter, which is delivered to our subscribers each morning at 5:15 a.m. The POLITICO Pro platform combines the news you need with tools you can use to take action on the day’s biggest stories. Act on the news with POLITICO Pro. The cryptocurrency industry is set to score its biggest lobbying win ever this week, when House committees vote for the first time on bills that would set up special rules for digital asset trading. The next big test: Fending off a looming crackdown in the Senate, where a growing number of Democrats and Republicans are rallying behind proposals to curb crypto’s use in money laundering, drug trafficking and sanctions evasion. The disconnect — dissected in depth here by our Eleanor Mueller — illustrates how far the crypto world has come in its bid for legitimacy, but also how it’s failed to prove its worth in the eyes of a critical mass of lawmakers. A series of scandals and evidence that crypto delivers scant economic value have done little to help the cause. Your MM host covered Congress’s first “virtual currency” hearing in 2013. It’s notable how the crypto world has struggled over the past decade to tamp down what was a big concern for lawmakers from the beginning: the technology’s use in criminal activity. The WSJ reported last week that officials “are increasingly seeing cryptocurrency play a role in almost every area of the criminal underworld.” To be sure, the federal government has put rules in place to police crypto money laundering since Bitcoin hit the scene. Law enforcement has brought a series of high-profile cases demonstrating its ability to “follow the money” in the digital asset world. But it’s not enough for a growing number of lawmakers, and closing any lingering gaps is turning out to be the Senate’s crypto priority. It’s a concern that is uniting everyone from Sens. Mitt Romney (R-Utah) to Elizabeth Warren (D-Mass.). Senate Banking Chair Sherrod Brown — a crypto skeptic who more or less controls the chamber’s agenda on the issue – told Eleanor: “The first part is whatever it takes to crack down on the money launderers and the criminal syndicates that are using crypto.” The industry has long treated the prospect of new anti-money laundering requirements as not just unnecessary but also a threat to “decentralized” finance and privacy. But even its allies on Capitol Hill — like Sen. Cynthia Lummis, dubbed the Senate’s “crypto queen” — are signaling that it’s a political reality that digital asset firms will have to accept if they want any hope of getting other regulatory carveouts. “In some ways, I think the Senate approach is smarter because they're solving a very clear and present problem,” said Rep. Jim Himes (D-Conn.), who may support the House GOP proposals. “[In the House] it's this idea that, ’Oh my goodness, exchanges may set up in Australia.’ That would make me sad. But again, I just don’t know that. I just think there’s a lot of nonsense in this industry.” The bottom line: House Republicans are about to make history by advancing Congress’s first-ever federal regulatory framework for crypto. They may even pass it in the coming months with bipartisan support. The crypto world will revel in its moment of political legitimacy. But the effort already feels DOA, especially if digital asset advocates continue to resist the Senate’s big ask. Happy Monday — Congress has one more week to go until August recess. What should we be covering? Drop us a line.
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