Rep. Patrick McHenry advocates for industry-supported regulation bill in the crypto sector.

• An industry-backed regulation bill is being fought for by a powerful ally in the crypto industry to be added to must-pass defense funding legislation.
• If Rep. Patrick McHenry (R-N.C.) succeeds, he could give the cryptocurrency industry a significant victory.
• His tactics are frustrating his colleagues on both sides of the aisle.

In Congress, a powerful ally of the crypto industry is fighting to include an industry-supported regulation bill in the upcoming defense funding legislation.

If Rep. Patrick McHenry’s (R-N.C.) hardball tactics succeed, the cryptocurrency industry could gain a significant advantage. However, his tactics are causing frustration among his colleagues on both sides of the aisle.

The bill aims to provide clarity on how federal agencies regulate cryptocurrencies, and could help resolve a major question in tech policy: Should cryptocurrencies be treated as commodities or securities? The answer could significantly influence U.S. regulation of digital currencies for years to come.

The bill proposed by McHenry has never been voted on in the full House or Senate.

The Financial Services Committee chair, McHenry, is advocating for his bill to be included in the National Defense Authorization Act, which funds the Pentagon annually.

The House and Senate are currently reconciling their respective versions of a bill that Congressional leaders hope to pass before the end of the year.

Opposition to McHenry's crypto bill is strong among key Senate Democrats, including Banking Committee chairman Sen. Sherrod Brown (Ohio).

According to Brown, there is no chance that any industry-written crypto bill will pass in the House or the Senate.

McHenry holds sway over the committee's final bill through his position on the Financial Services Committee and his ability to veto issues under his committee's jurisdiction.

McHenry is preventing other amendments from being added to the defense bill, including one addressing the fentanyl overdose crisis, according to four congressional staffers who were granted anonymity to discuss negotiations.

Frustration over the holdup is hitting a high point.

Rep. French Hill, an Arkansas Republican who also led on crypto bills, stated that the legislation was unlikely to be passed into a bill this year, indicating that McHenry's effort might be losing steam.

He stated on CNBC's Squawk Box that he does not expect success this year, but rather in early 2024.

Outbound investment bill

McHenry is facing challenges beyond crypto in the defense bill, including blocking a bipartisan provision requiring entities to notify the government of investments in national security sectors in adversarial countries like China or Russia.

McHenry has consistently opposed the measure, contending that granting U.S. firms the ability to invest provides them with control and valuable knowledge about the national security and technological capabilities of foreign enterprises.

John Cornyn, a Republican senator from Texas, along with Bob Casey, a Democrat from Pennsylvania, proposed a provision. According to Cornyn, Congress should establish its own guidelines.

The government must be informed of specific outbound investments, as mandated by the White House in an August executive order.

Why would Republicans follow Biden's Executive Order instead of establishing their own rules?" Cornyn stated on X on Wednesday. "We must curb executive authority.

The House's select committee on the Chinese Communist Party, led by Rep. Mike Gallagher (R-WI), opposes removing the outbound investment bill from the final NDAA.

As Congress delays, we remain at risk of self-destruction, he stated on Thursday. "I am eager to collaborate with my colleagues across the political divide to achieve this national security objective," he added.

On Wednesday, the Foreign Affairs Committee in the House approved a stricter version of the outbound investment bill, increasing the number of sectors subject to notification requirements.