Patrick McHenry Explains FIT21’s Passage

Congressman Patrick McHenry (R-N.C.) chairs the powerful House Financial Services Committee, and has been the leading Republican on the panel for years. Last year, he spent a few weeks as the Speaker Pro Tempore of the House of Representatives, after lawmakers voted to oust then-speaker Kevin McCarthy (R-Calif.). McHenry announced his retirement in December and will leave office when his term expires this coming January. He spoke virtually at Consensus 2024 in Austin at the end of May.

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‘Two-thirds … is extraordinary’

The narrative

Rep. Patrick McHenry (R-N.C.) spoke at CoinDesk’s Consensus 2024 last month, discussing everything from the Financial Innovation and Technology for the 21st Century Act (FIT21) to how he landed up as Speaker Pro Tempore. Similar to last week’s newsletter, my questions have been shortened but the Congressman’s statements have only been edited lightly.

Why it matters

The Congressman has been a key figure in crypto circles, working on and advocating for legislation and advancing a bill through the House last month.

Breaking it down

I want to get started right away. Obviously last week [near the end of May], we saw the House vote overwhelmingly in favor of the FIT21 bill. How did we get here?

Two-thirds of the House voting for the bill is extraordinary when its simple policy, and when its innovative and new policy, it’s even harder. But we got here because of valid policy – number one – real innovation and relationships. Now let me explain. We listened to all the critiques of the existing marketplace in crypto. We listened to the critique of policymakers that wanted to improve the marketplace on both parties, both sides of the House, both sides of the chamber, and we built our policy set around the conditions that people saw for themselves in trying to answer those questions, that’s number one, policy.

Then we have real innovation – real builders doing real things using real technology. The real technology is getting there, but it has to be evidenced to policymakers that there is real innovation, and we’re now seeing it in a major way. Third, relationships, both with policymakers like me, with Congressman French Hill, Congressman Glenn Thompson, Congressman Dusty Johnson, as well as Democrats, like Wiley Nickel in my native state of North Carolina, as well as Jim Himes, Brittany Pettersen from Colorado and Josh Gottheimer, and a number of other Democrats that are deeply engaged on the policy set. So then outside relationships, you the innovators, the builders, the technologist decided that Washington was important. And you started developing relationships, real relationships with policymakers and explaining the real innovation and the policy to policymakers. That’s what made the difference. And those relationships, but nice pressure on policymakers to perform. And we saw performance in a major way, which gives us a great opportunity to make a law this year.

Gotcha. So, you know, I think the big question now for many of us is where does this bill go from here?

Well, that’s where the next set of operations move to. Look, the White House not issuing a veto threat on FIT21 was helpful and good, and it shows that they want to be at the table and make policy here. The Senate is a more complicated beast, it always is, but we need to do all that we can to reach out to senators and make sure that they prioritize this in this election year, and getting things through the Senate, and if we can get two-thirds of the House to vote for this bill, they should be able to get two-thirds of the Senate to vote for this bill or something very similar.

Is it that this is an election year that we’re seeing so many lawmakers from both parties vote for crypto bills like the SAB 121 repeal and the FIT21 Act? Or is there any validity to the idea that this is the first time these bills have even come up for a vote in the House and Senate?

It’s new policy. We have heard from the outside world and in the news media that there are crypto voters. And I think it’s clear there are crypto voters, and they can go to the left or they can go to the right for the candidates. But they primarily want to know whether or not you’re innovation-forward and you’re for crypto, and I think that’s helped soften up policymaking.

The other thing that’s of interest is that the fight from some in Washington is about the last financial crisis. And they’ve tried to make everything that deals with financial policy into bank policy. And especially too big to fail policy, or post-financial crisis policy. Crypto is not. Crypto is not traditional finance. I don’t think it’s still constrained by the old politics of the last financial crisis. This is a whole new thing. It’s innovation policy, and it’s the next foundation of of technology, the internet, and we want to be at the forefront of this, not behind the rest of the world. So I think that factor is big as well, that this is not financial, these aren’t financial products, per se, it’s technology we need to have a regulated means of using this technology, building this technology in the United States, and not falling behind Europe and the rest of the EU..

We spoke a year ago about the possibilities of a crypto bill getting through Congress … I was hoping maybe you could just speak a little bit to what the challenges that you specifically encountered were and basically what happened?

Well, we talked last in this format, I didn’t think that I was going to end up being Speaker Pro Tem, that we’d have a Speaker of the House thrown out for only having legislative successes. I didn’t think my party would be that stupid to do that. But that happened, and I ended up serving as Speaker Pro Tem for 23 days last October. That scrambled the legislative playbook. And I designed my agenda in committee around what I thought the legislative framework would be what the legislative opportunity would be.

A lot happened that was unforeseen, when we last talked that put us behind, and actually put us behind in this policy – bringing crypto to the fore, bringing FIT21 to the floor by probably five, six months. But in those five or six months, relationships built, innovation occurred and policy sharpened and all that helped to build a bigger vote for FIT21 in the House. So some of those delays were political and the calendar, the legislative calendar but the advantage we got out of that is a bigger vote in the House, which will give us an opportunity and we live to fight another day and get something out of the Senate. If we get something out of the Senate, I think we’ll get something signed by this President. And if not this President, the next President.

For a while, it seemed like stablecoin legislation might be the most likely candidate for becoming a law in the near future, and I’m just curious to know what your expectations are now, what work is going on?

Well, look at this stage, right now, we will have crypto law within the next year. And I can say that with certainty. If it doesn’t happen now, between now and the election, I think that what we’ve passed out of the House will make its way into law, and in very similar form, under the next Congress, I really think that happened.

Same thing for stablecoin legislation. I think we’re so close on this, we just need a legislative calendar, so that we can get things across the finish line in the Senate. And that means we have to have the time allocated to do it. So I think at this stage of the game, crypto policy is inevitable, and crypto law is inevitable. And we will start catching up with Europe, Singapore, Hong Kong, and Japan and having some market certainty and pro-innovation policy.

So earlier today, we had Majority Whip Tom Emmer onstage on the stage, and he suggested that the lame duck session might be a time or the opportunity for attaching something to a must-pass bill – are you looking at any of the pieces of legislation that are likely to move in that time period as maybe did vehicle to have some crypto legislation, make its way?

Anything, and everything, that’s what I’m looking for. We basically have a consensus product out of the House of Representatives, that gives us a fighting chance in every legislative product that makes its way to the President’s desk, I think that’s a huge thing that we’ve got to take advantage of, and leverage it into law, and use every opportunity that we have to get a good deal.

Are there any other issues in crypto specifically that you’re looking at as areas where, you know, maybe it could benefit from legislation either addressing the regulators, different markets? And, you know, so how are you looking at these?

Well, look, I’m not going to go negotiate against myself. We’ve got a bill out of the House of Representatives, and it got almost every Republican, and it got a third of the Democrats. In this political environment, for us to do that is massive, massive, and almost unheard of when it comes to policy coming out of the [Agriculture] Committee, or out of the Financial Services Committee in the House. So I think that’s a big thing, and it’s the main thing, and we’re gonna stay focused on the main thing. If we get market structure done, that is a win. And then we can further refine what these regulators should and should not be doing. But if we get this market structure bill passed, that will put us at the forefront of digital asset policy for the globe. That’s where we deserve to be, that’s where we should be. That’s where I’m fighting for us to be.

You announced your retirement at the end of this term. You have seven months. I’m really curious, are there any particular goals, any piece of legislation besides crypto or in addition to what you’ve already gotten through the House that you’re just looking to accomplish in that time?

I’ve got my three major priorities for the Financial Services Committee, and that is the market structure bill, for digital assets, number one. Number two, data privacy for the financial services realm. We’ve got to make sure that we have the best technology protecting our financial data. And third and finally, capital formation, helping link up investors with new investment opportunities for small businesses to find new sources of capital, and to make the system easier for folks to get their ideas connected with capital. And so those are my major priorities, the capital formation, data privacy and digital assets. And I’ll take any one of those signed into law this year.

I know you have to jump, but I really appreciate your joining us. And good luck with the rest of your term.

Well, thank you, Nik. And thank you all for your engagement without, without the crypto community without the digital asset, world, and activist. Without every tweet, without every phone call you’ve made without every email, we would not have had this big vote in the House.

So keep innovating, keep driving, Keep creating. And that will help bring us victory and clarity under law. So thanks so much for your engagement. And thank you for your friendship. God bless.

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If you’ve got thoughts or questions on what I should discuss next week or any other feedback you’d like to share, feel free to email me at nik@coindesk.com or find me on Twitter @nikhileshde.

You can also join the group conversation on Telegram.