Revived Lummis-Gillibrand crypto bill won't touch Fed master accounts

WASHINGTON — Sen. Cynthia Lummis, R-Wyo., said that she and Sen. Kirsten Gillibrand, D-N.Y., aim to reintroduce their crypto regulation bill in mid-April, and a spokesperson with Lummis' office said the new version will exclude a controversial provision that would make it easier for state-chartered banks to get a master account with the Federal Reserve.

Speaking Thursday at an event hosted by the Milken Institute on the future of digital assets, Gillibrand and Lummis said that they are continuing work on the bill and that it would be in some ways more thorough than their previous version. 

"We're also looking to address some of the concerns that we heard from regulators and the industry to clarify in certain areas," Gillibrand said. "It might be a more thorough bill than the first version because the first version was an introduction of what a baseline framework would look like." 

Banks had reservations about the prior iteration of the bill, which said that any state-chartered depository institution would be entitled to an account at a Federal Reserve bank regardless of whether it is federally insured or supervised.  The bill also would have authorized states and the Office of the Comptroller of the Currency to charter special-purpose banks that issue stablecoins. The collapse of crypto exchange FTX late last year increased regulatory scrutiny of cryptocurrencies' infiltration of the banking system, Lummis said, and a spokesperson from her office clarified that the master account provision "will not be included."

"The bill is going to be stronger," Lummis added. "It's also going to address some of the things that happened with FTX." 

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The odds of the Lummis-Gillibrand bill making it through the Senate remain slim, especially as Senate Banking Committee Chair Sherrod Brown, D-Ohio, continues to express skepticism about digital assets and how they interplay with the banking system. Brown has shown little interest in scheduling a committee vote on any legislation. 

"It would require, certainly, a change in approach for the Banking Committee to move forward with markup," Lummis said.

Still, Lummis and Gillibrand's work on the bill has sent a powerful signal about attitudes on crypto, particularly among lawmakers who don't want to stymie the industry. Lummis said that in the aftermath of the FTX bankruptcy, other lawmakers have been less willing to engage on the bill or on a wholesale effort to regulate crypto. 

"The problem we're having is conflating fraudulent behavior with the underlying asset," Lummis said. "Because there's been a chilling effect, I believe, in people's willingness to be thoughtful and pursue this subject."