‘Best Day Ever’ as Anti-Crypto FDIC Chair Resigns Amid Scandal

Martin Gruenberg, chairman of the FDIC, will resign after an investigation revealed a toxic workplace culture and allegations of misconduct. Meanwhile, Kendrick Meek, a former U.S. Representative, joins Coinbase’s Global Advisory Council. The United States House of Representatives is also set to vote on two pro-crypto bills this week, the FIT21 Act and the CBDC Anti-Surveillance State Act. While Democratic leaders have strongly urged members to oppose these bills, there is no directive for a mandatory no vote.

FDIC Head to Resign

Martin Gruenberg, chairman of the United States Federal Deposit Insurance Corporation (FDIC), will step down from his position after an investigation that revealed a toxic workplace culture at the bank regulator. On May 20, Gruenberg announced his intention to resign from his position, which he has held since August 2005. For now, he will continue his responsibilities until a successor is confirmed.

This decision comes after a May 7 investigation that uncovered allegations of sexual harassment and other misconduct at the FDIC. On May 15, Gruenberg testified before Congress about the widespread allegations of sexual harassment and mistreatment of subordinates at the FDIC.

He faced criticism from all sides and lawmakers are shocked at the extent of the issues in the agency. Calls for his resignation have been made by several lawmakers, including Senate Banking Chair Sherrod Brown, who urged President Biden to nominate a new FDIC chair. On the other hand, Senator Elizabeth Warren is confident that Gruenberg can implement changes needed at the agency.

Meanwhile, Gruenberg's resignation has been met with a lot of approval from the crypto community. Castle Island Ventures partner Nic Carter even called it "the best day ever." Digital asset industry lawyer John Deaton was more focused on Elizabeth Warren’s response and criticized her for supporting Gruenberg, referring to him as a "disgraced puppet."

Gruenberg has been linked to "Operation Choke Point 2.0," a term coined by Carter in 2023 to describe a coordinated effort by the FDIC to prevent banks from engaging with crypto firms. In an October 2022 speech, Gruenberg also compared crypto assets to risky financial innovations that contributed to the 2008 financial crisis.

Kendrick Meek Joins Coinbase

Some politicians are much more open minded towards crypto. Kendrick Meek, former House Representative for Florida's 17th congressional district, has joined Coinbase’s Global Advisory Council to address the regulatory landscape of digital assets in the United States.

On May 20, Coinbase Chief Policy Officer Faryar Shirzad announced Meek's appointment on social media. Meek served in the U.S. House of Representatives from 2003 to 2011 and was a member of the Committee on Ways and Means. He also believes that digital assets offer new opportunities to tackle long standing issues in the financial system. He now joins other former U.S. lawmakers on the council, including Stephanie Murphy, Tim Ryan, and Pat Toomey.

Coinbase established the advisory council in May of 2023 to navigate the global crypto landscape. The exchange is currently facing a lawsuit from the U.S. Securities and Exchange Commission (SEC) and is also involved in the 2024 election season through its Stand With Crypto initiative.

House to Vote on FIT21

Meanwhile, in the realm of crypto regulation, Republican lawmakers in the United States House Financial Services Committee announced that the House of Representatives will vote on the Financial Innovation and Technology for the 21st Century (FIT21) Act this week. The legislation will clarify the roles of the Commodity Futures Trading Commission (CFTC) and the SEC when it comes to regulating digital assets.

Despite being passed out of the House Financial Services Committee in July of 2023, the FIT21 bill has seen very little movement until now. Committee Chair Patrick McHenry indicated in May that the House Committee on Rules could clear the bill for a vote in the full chamber.

So far, the bill has received a lot of support from many industry advocates and House members, and it is one of the few pieces of crypto-focused legislation progressing through Congress this session. The Blockchain Association and Crypto Council for Innovation have urged House leadership to support FIT21 as they believe there is a serious need for pro-innovation and pro-consumer regulatory frameworks in the U.S.

The outcome of the vote is still a bit uncertain as Republicans hold a slim majority in the House. 21 Democrats did, however, join Republicans on May 8 to support a resolution nullifying a SEC accounting rule. Sheila Warren, CEO of the Crypto Council for Innovation, sees FIT21 as a critical step toward establishing a federal regulatory framework for digital assets in the U.S., despite acknowledging that no bill is perfect.

Political considerations may influence lawmakers' votes on FIT21, especially with the 2024 U.S. elections already underway. Some lawmakers, like Senator Elizabeth Warren, have stood firm in their regulatory stance on digital assets as Election Day approaches.

Pro-Crypto Bill Clears House

As the crypto community waits for the United States House of Representatives vote on the FIT21 Act, another pro-crypto bill, the Deploying American Blockchains Act of 2023, has been passed. Approved by a margin of 334 to 79, this bill directs the Secretary of Commerce, currently Gina Raimondo, to promote the competitiveness of the United States in blockchain technology and other distributed ledger technologies.

The bill establishes the Secretary of Commerce as the principal presidential adviser on blockchain and assigns several responsibilities, including policy development, research, and promotion of the technology. It also mandates the formation of an advisory committee composed of governmental, industry, academic, and cultural representatives, which will present an annual report to Congress.

The bill was introduced by Representatives Lisa Blunt Rochester and Larry Bucshon, neither of whom have a prior record on blockchain or crypto issues, and it received unanimous approval from the House Committee on Energy and Commerce on Dec. 5. It has also been endorsed by the Chamber of Digital Commerce and Blockchain Association.

Opponents of the bill included crypto skeptics Sean Casten, Bill Foster, and Brad Sherman, as well as pro-crypto Senator Cynthia Lummis’s lower house colleague Harriet Hageman. Casten, along with Sherman, Foster, and others, also sponsored the Blockchain Integrity Act that was introduced on May 7, which plans to ban crypto mixing services for two years pending a Treasury Department assessment.

The House passed the Deploying American Blockchains Act on May 15, alongside two other blockchain-related bills: the Consumer Safety Technology Act and the Promoting Resilient Supply Chains Act. All three bills will now proceed to the Senate for consideration.

Currently, there are about 50 bills affecting crypto at various stages of consideration in the U.S. Congress.

Democrats Urged to Oppose Pro-Crypto Bills

United States House of Representatives Democrats will not be forced to vote against two pro-crypto bills expected to come up for a floor vote this week, although they are strongly urged to do so. An email from Democrat Party leaders to House members, shared by POLITICO, indicates no directive to vote no on the Republican-led FIT21 Act and the CBDC Anti-Surveillance State Act (H.R. 4763 and H.R. 5403).

Representatives Maxine Waters and David Scott strongly oppose FIT21, and Waters also opposes the CBDC Act. They believe that FIT21 undermines legal precedents, weakens investor protections, and creates opportunities for fraud and market manipulation. Additionally, Democratic leaders claim the CBDC Act will harm the U.S. dollar's primacy and hinder the Federal Reserve's ability to conduct monetary policy.

Floor debate and passage of FIT21 are expected on Wednesday, May 22, according to POLITICO’s Eleanor Mueller.