The House Financial Services Committee met yesterday to discuss market structure legislation, a bill that would finally define how the SEC and CFTC would divide regulation of the cryptocurrency industry.

State of play: The initial hearing to consider the CLARITY Act featured plenty of support for the merits, but it's clear that the Trump family's ventures in the crypto industry are creating a giant haze in the bid for Democratic support.

Friction point: House Democrats at the hearing pounded repeatedly on the issue. And a pair of comments spoke directly to the ongoing ambivalence felt by members of the party that would like to move forward on digital assets.

• "I am also deeply concerned about the president profiting off of the presidency, especially how he's using using digital assets to do so," Rep. Brittany Petterson (D-Colo.) said. "I know that this is really important, that we come together to provide clarity, making sure that we're not seeing businesses move from the United States."
• "Those of us who might be inclined to support this thing so that it can be bipartisan are not going to add our names to something that is associated with the rank corruption that we see out of the White House," Rep. Jim Himes (D-Conn.) added.

The big picture: Witnesses at the hearing did drill into the importance of market structure legislation, while diving into the bill's approach for a regulatory scheme.

• One big impetus is to prevent the United States from losing its competitive edge in the crypto industry.

Zoom in: One witness, former CFTC chair Rostin Behnam, pushed back on the longstanding reluctance of Democrats to legitimize an industry that has been rife with scams and crime.

• "I believe this argument is the loophole. It has only left, for far too long, the vast majority of the digital-asset market unregulated and American investors vulnerable to fraud and manipulation," Behnam said in his testimony.
• He offered balanced encouragement for the effort of the committee so far, while emphasizing ways in which he would tighten up the bill. Notably, he suggested encouraging industry self-regulation (a la FINRA, the leading tradfi version) and a public education campaign.

The other side: Another former CFTC chair, Timothy Massad, who is now at Harvard Kennedy School — the witness requested by Democrats — countered that the approach described in CLARITY is complicated such that it could be easily gamed by clever attorneys.

• "The path forward should recognize that the regulatory gap arises in large part because we have a fragmented regulatory system," he said.

What we're watching: Some Democrats are complaining the newly crypto-friendly SEC is slow rolling the ability of lawmakers to evaluate the bill.

• The House Financial Services Committee's ranking member, Maxine Waters (D-Calif.) sent a letter to the securities regulator on Tuesday, alleging that technical analysis from the agency has only been provided to the majority party so far.
• During the hearing she moved that an additional hearing should be scheduled with witnesses chosen by Democrats, under the House's minority witness rule.

Rep. Mike Flood (R-Neb.) pushed back and said, "Part of the reason we are still talking about the digital asset market structure today is that both the SEC and Congress did not rise to the occasion in the Biden years to provide clarity and, most importantly, to protect investors."

What's next: Another hearing today and a hearing led by Democrats tomorrow.

Circle, the largest U.S. issuer of stablecoins, raised $1.05 billion in an upsized IPO.

Why it matters: It's a giant vote of investor confidence for both the U.S. crypto market and the VC-backed IPO market.

By the numbers: Circle sold 34 million shares at $31 a piece, both above both initial and upwardly revised plans. It gives the company around an $8 billion fully diluted market value.

• The company had raised $1.2 billion from firms such as Accel, Breyer Capital, Fidelity, General Catalyst, IDG Capital and Oak Investment Partners.

💭 Brady's caveat: Tether is already miles ahead, and all the world's biggest banks are about to jump in too. The big question is whether or not even a few hundred million dollars will be enough to make a difference.

Flashback: I remember visiting Circle when it was still in Boston's nascent Seaport district, right next door to a Dunkin' Donuts. At the time, the goal was basically to enable bitcoin payments, with CEO Jeremy Allaire pointing at my Dunkin' iced coffee and saying that someday I'd buy it using Circle/Bitcoin.

• That still hasn't really panned out, but the pivot sure did.

Worthy of your time: A stablecoin Game of Thrones.

Obviously the other major legislative topic this year is stablecoins, and more and more evidence is coming out that this particular application of blockchain technology is working well.

The latest: Artemis Analytics and a group of VC firms released a new study on stablecoins as payments, which found that the instruments are on a $70 billion annual run rate in payments alone this year.

• That is, stablecoins to buy things, to close deals, to manage treasuries or fund credit card transactions, not crypto trading.

Zoom in: In the chart above, person-to-person payments start as the leading use case for stablecoins, however, in just a couple years, business-to-business transactions became the biggest use case.

Flashback: One of the funders of this research, Castle Island Ventures, backed a prior study where users in developing economies were surveyed on how they use stablecoins.

"We need to get [GENIUS] on the floor. And that's where my discussions have been with the leader and with my colleagues, is getting that time on the floor as soon as possible. I'd like to start it today, tomorrow."

— Sen. Bill Hagerty (R-Tenn.) in comments on Bloomberg yesterday

💭 My thought bubble: It's reassuring to hear that the author of the Senate's stablecoin legislation sounds just as confused about what's going on with this bill as I am.

🪣 Strategy proposes yet another way to finance buying more bitcoin. (Bloomberg)

🇫🇷 The French are getting into kidnappings to steal crypto. (The Guardian)

🏦 JPMorgan will float loans collateralized by client crypto ETF holdings. (Bloomberg)

💭 My thought bubble: Once crypto starts hooking into the real economy like this, well, watch out real economy.

Brian Quintenz's nomination to head the CFTC finally has a hearing scheduled in the Senate Agriculture Committee next week.

Reality check: Just one problem: He'll soon be the sole commissioner left.

• Right after we last covered all of the commissioner departures from the agency, the last commissioner standing also announced plans to leave (though her timing is loose).

What we're watching: Whether or not the White House nominates more commissioners and, if it doesn't, how well the agency can function.