Pro-crypto House member wins Senate seat in California

Soon after the polls closed in California at 8 P.M. local time, major news outlets called the race for Adam Schiff, a Democrat who currently represents the state's 30th Congressional District just outside of Los Angeles, encompassing the city of Burbank.

Schiff defeated Steve Garvey, who is a Republican and former Major League Baseball player for the LA Dodgers and San Diego Padres from 1969 to 1987, to win the safely Democratic seat. Schiff chaired the House Intelligence Committee from 2019 to 2023 and was the lead impeachment manager in the first impeachment trial of President Donald Trump.

Schiff has taken a number of positions that are important to bankers, including backing legislation that would claw back bonuses and stock profits from executives at banks that fail, a bill that would regulate what he calls the "revolving door" between the financial services industry and its regulators, and pro-cryptocurrency positions that have earned him the backing of a pro-crypto policy advocacy group.

Schiff will replace Laphonza Butler, a Democrat, in the Golden State's Senate delegation, joining Alex Padilla, also a Democrat. Governor Gavin Newsom appointed Butler to the seat last year following the death of Dianne Feinstein, the longest-tenured female senator. Brown did not run to keep the appointment, and her seat on the Senate Banking Committee will be up for grabs.

Schiff technically won two races this election: a two-month term that will begin as soon as the state certifies the results of the election, which according to officials could be this month, and one for a full, six-year term that will begin January 3.

Here's a look at some of the issue positions on banking and finance Schiff has taken:

Bill to claw back executives' profits after bank failure

In the wake of the failure of Silicon Valley Bank, Schiff introduced legislation alongside Senator Richard Blumenthal (D—Conn.) and Representative Mike Levin (D—Calif.) to impose a 90% tax on bonuses and 100% tax on profits from stock sales paid to bank executives within 60 days of a bank failing.

The bill is titled the Deliver Executive Profits on Seized Institutions to Taxpayers Act, or DEPOSIT Act for short. The bill has not received a vote.

Schiff said the bill is designed to remove the incentives that bank executives have to "prioritize short-term profits and their own compensation over the interests of customers and the public." He said it would be "just the first step in making sure executives are held accountable."

The idea of clawing back bonuses and stock profits paid to executives at failed banks received backing from President Joe Biden, though he did not specifically name Schiff's bill in the statement.

Bill to regulate the "revolving door" in financial services

In January, Schiff introduced legislation in the House that would restrict employment opportunities for certain former federal financial regulators and former senior officials at banks and credit unions for two years after leaving a job.

The bill is designed to restrict so-called "revolving door" practices, in which individuals leave a job at a regulator to take a job at a regulated entity, or vice versa. This practice is already restricted for a 12-month period after working at either a regulated entity or a regulator. Schiff's bill would extend that to a two-year period.

In the direction of leaving a bank or credit union to join a regulator, the bill would apply to former executive officers of banks or credit unions that, in the past 20 years, were the subject of an official action by the regulator. Examples of official actions are being awarded contracts or being the target of an investigation.

The bill has not been put to a vote.

Schiff said that Americans "stand to lose" when financial regulators "go through the revolving door" by working for the industry they once regulated.

"That's why I am introducing this bill to ensure that the people entrusted with protecting and regulating our economy are working for us, not just biding their time before they jump ship to lucrative industry jobs," Schiff said. "This legislation will help make certain that our financial system is fair and transparent, giving everyone a fair shot, not just the financial insiders."

Pro- and anti-cryptocurrency votes and positions

While Schiff is generally regarded as one of the most crypto-friendly Democrats in Congress, he has not universally sided with these interests, and crypto interests have not always agreed with him.

In May, Schiff voted against a joint resolution that would have made it easier for banks and other companies to hold digital assets in custody on behalf of customers. The resolution had the backing of crypto groups and banking industry groups, including the American Bankers Association and the Bank Policy Institute.

The resolution, which passed the House and Senate but was vetoed by President Joe Biden, would have repealed guidance from the Securities and Exchange Commission issued in March 2022. That guidance required most SEC registrants that hold crypto assets for their clients to record that risk on their balance sheets as a liability.

So, Schiff's vote implied he supported the guidance, to the chagrin of crypto advocates and banks alike.

He also voted against a bill to prohibit the Federal Reserve from issuing a central bank digital currency (CBDC) directly to consumers. The term for such a currency is a retail CBDC, as opposed to a wholesale CBDC, which the central bank would issue to banks, which would then issue the currency to consumers.

The Republican-backed bill, named the CBDC Anti-Surveillance State Act, had unenthusiastic backing from pro-crypto advocacy group Stand With Crypto, which said that the bill would ensure that the government could not exercise surveillance of how consumers are using digital currencies, though it would also preclude the issuance of one of the major types of CBDC.

The American Bankers Association also backed the bill because the group "believes strongly" that a CBDC "is unnecessary in the United States and would present unacceptable risks and costs to the financial system."

Despite these two votes, Schiff is regarded as an ally of the cryptocurrency industry, mainly because of his support for a regulatory framework for it.

This year, Schiff voted in favor of a bill that aims to set up a regulatory regime for cryptocurrency. The bill, the Financial Innovation and Technology Act of the 21st Century (shortened to FIT21), received bipartisan support in the House and from cryptocurrency groups. The Senate has not voted on the bill.

Schiff described the bill as a "good first step" toward creating a regulatory framework for cryptocurrency.

"In the absence of federal rules of the road, these companies and jobs are moving overseas where they often face less scrutiny," Schiff said after the House passed the bill. "We should be fighting to keep them here and seeking to create more opportunities for entrepreneurship in California — not driving them away and creating a regulatory gap."

Schiff doubled down on this message in his campaign for the Senate, saying that a regulatory framework for Web3, cryptocurrency and blockchain companies will help ensure the U.S. "remains the global leader in these important new technologies."

His somewhat mixed record on crypto has earned Schiff an A rating from Stand With Crypto, though no endorsement from the group, which has endorsed four other A-rated Senate candidates.

Schiff also has not received any direct funding from pro-crypto political action committee (PAC) Fairshake. That's according to OpenSecrets, a nonprofit that analyzes campaign finance data.

But, Fairshake did run $10 million in advertisements in the primary election against Schiff's top opponent, a crypto skeptic and fellow Democrat, Katie Porter. In the deeply blue state of California, this ad spending likely went further to determine who would ultimately hold the seat than ad spending in the general election itself would have.