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The push to regulate cryptocurrency could cause friction in Congress

MARY LOUISE KELLY, HOST:

Cryptocurrency is at a crossroads. As its popularity explodes and bitcoin hovers near a record high, the Biden administration is laying the groundwork for heavier regulation. That could set up a fight in Congress. As NPR's David Gura reports, a small group of lawmakers is worried the U.S. could miss out on an opportunity to be a leader in a financial revolution.

DAVID GURA, BYLINE: Republican Cynthia Lummis is a senator from Wyoming, a rancher and a HODLer.

CYNTHIA LUMMIS: My son-in-law has a shirt that says friends don't let friends sell bitcoin. And that is my investment strategy for bitcoin.

GURA: A HODLer is crypto-speak for someone who bought cryptocurrency and who's held on to it, despite its extreme volatility. Lummis paid $330 for her first bitcoin back in 2013, and today it's worth around $60,000. She's bought more of it since, which means Lummis stands to gain or lose from the policy she's helping to shape. Lummis wants Wyoming to become one of the world's crypto capitals.

LUMMIS: So the concept of mining bitcoin and its great store of value was something that resonated with me, coming from a mining state.

GURA: Wyoming appeals to bitcoin miners who use computers to crack codes to create new cryptocurrency. That's an energy-intensive process, and Wyoming is an energy-rich state. It also has light regulations and it provides tax incentives. And Lummis is calling on Congress to follow Wyoming's lead.

LUMMIS: We want the innovators to innovate. We want to create a space where the United States is the leader in opportunity for the creation and use of digital assets.

GURA: Lummis' approach to regulation puts her at odds with another outspoken member of the Senate Banking Committee. That's Democrat Elizabeth Warren, who wants tougher rules. Cryptocurrency has become a popular investment, but it's also gotten a bad name because of how it's being used for money laundering and in ransomware attacks. Warren told Bloomberg TV, cryptocurrency is like the Wild West.

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ELIZABETH WARREN: Right now, our regulators and frankly our Congress is an hour late and a dollar short, and we need to catch up with where these cryptocurrencies are going.

GURA: Their market cap worldwide is now close to $2.5 trillion, which is almost as large as the GDP of France. Even the big Wall Street banks now trade bitcoin. And Gary Gensler, the head of the Securities and Exchange Commission, shares Warren's concerns. Here's what he said in a recent speech.

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GARY GENSLER: This asset class is rife with fraud, scams and abuses in certain applications. There's a great deal of hype and spin about how crypto assets work.

GURA: And Gensler is asking lawmakers for their support and for more resources. That makes Senator Lummis nervous. She's worried more rules will make the U.S. less competitive. And the crypto industry is also fighting back. So far this year, it spent more than $2.5 million lobbying lawmakers. Republican Congressman Warren Davidson believes Congress needs to make a decision about what to do with cryptocurrency and soon.

WARREN DAVIDSON: The industry is basically pleading, give us some regulatory clarity.

GURA: Davidson also fears too much regulation could harm investors and entrepreneurs, but he thinks inaction is also a risk. Davidson says when he goes back to his district in Ohio, his constituents ask him when Congress is going to get around to setting ground rules.

DAVIDSON: Maybe the best answer is slowly at first and then all of a sudden, which is the same way people go bankrupt, by the way.

GURA: As the industry continues to grow and as the popularity and price of cryptocurrencies skyrocket, Davidson says he and his colleagues have to get moving, even if it involves a big fight. David Gura, NPR News, New York.

(SOUNDBITE OF MUSIC) Transcript provided by NPR, Copyright NPR.