In a recent interview with CoinDesk, Rep. French Hill, the chair of the House Financial Services Committee, expressed optimism that the Clarity Act would gain bipartisan support, highlighting tokenization as a significant upcoming focus for the committee.

You’re reading State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. Click here to sign up for future editions.

Tokenization Focus

According to Hill, tokenization follows stablecoins and market structure as the next priority for the committee. The House Financial Services Committee is one of the few Congressional bodies overseeing federal regulators involved in digital asset policies. It has been instrumental in pushing forward both the GENIUS Act, which centers on stablecoins, and the Clarity Act, which deals with market structure.

Hill noted that the House successfully achieved bipartisan agreement on stablecoin sales practices, decentralized finance, and ethics rules, which resulted in 78 Democratic votes for the Clarity Act last year. "I don't see any reason why they can't find consensus in the Senate on the House bill," he stated.

In early April, during the Digital Assets and Emerging Tech Policy Summit hosted by Vanderbilt University and the Blockchain Association, Hill discussed various issues under the committee's review. He mentioned that the Senate has started to incorporate elements from the House's version of the bill as negotiations continue for the upcoming Senate Banking Committee markup.

"The Senate's relied quite a bit on the House work on both FIT21 [the Financial Innovation and Technology for the 21st Century Act] from the previous Congress and Clarity in this Congress," he said. Hill also revealed that he and Rep. Bryan Steil, chair of the House Subcommittee on Digital Assets, have been in regular contact with senators about the Clarity Act.

Currently, the committee is examining various topics, including tokenization and the legislative role in this domain. A hearing on tokenization held in March aimed to help lawmakers evaluate what additional authorities or regulations might be needed from the Securities and Exchange Commission (SEC) and bank regulators to support the tokenization of real-world assets.

Hill emphasized the need to determine whether legislation is necessary or if regulatory policies could suffice. "Tokenization of an asset, such as a common stock, is really an exercise in changing systems," he explained. "It's not changing the law. All legal or regulatory requirements for common stock also apply to a common stock token."

He noted that both the House and Senate can utilize hearings to explore how existing systems can be adapted to blockchain technology. Additionally, Hill is considering the potential for tokenizing deposits within commercial banks, which could allow for direct debit payments without intermediaries, although this initiative is not immediately on the agenda.

"You think about going from call-out markets right to paper-based markets to digitization of that paper-based system, which took place in the 1970s and 1980s, and that's increased accuracy, reduced fraud, increased speed, decreased the need for liquidity [and] improved settlement," he commented. He remarked on the progress from T+5 to T+1 in equities settlement, suggesting that interoperability represents the most significant challenge in tokenization rather than the technical aspects.

"We'll find out if there needs to be some, you know, legislative activity versus purely regulatory, and that's good. That's what Congress's job is," Hill added. He also highlighted ongoing efforts to update tax regulations concerning digital assets, noting that the House Ways and Means Committee is addressing tax issues, with a bipartisan group reintroducing a bill focused on crypto taxes earlier this month.

With an election approaching that could shift control of the House and Senate, the crypto industry is actively involved in primary races, aiming to support candidates perceived as favorable to crypto interests. Hill acknowledged that the Financial Services Committee has a longstanding commitment to digital assets, referencing the collaborative efforts of past representatives across party lines over the last decade.

"In the past four years, we've seen the digital assets ecosystem really engage, not only on policy points, but also politically," he remarked. "And you saw that in the 2024 election … So I anticipate that the digital assets ecosystem, political activity will be important to the 2026 election. It's bipartisan. It's supportive of people who are pro-innovation."

Hill underscored the importance of political engagement from the crypto sector in the upcoming elections, indicating a growing bipartisan interest in the industry. He stated, "If we're successful in GENIUS rulemaking, and we're successful in passing Clarity, you'll commence about a 12-month joint rulemaking process between the CFTC and SEC," emphasizing the need for a coherent approach to regulation.

This Week

  • 14:00 UTC (10 a.m. ET) The House Financial Services Committee will convene an oversight hearing with federal bank regulators.

If you have any feedback or topics you would like me to address next week, please reach out via email at nik@coindesk.com or connect with me on Bluesky @nikhileshde.bsky.social.

Join the conversation on Telegram.

See you next week!