Utah Senator Mike Lee Warns of “Grave Risks” to Crypto Industry at Permissionless III Conference

On Friday, at the Permissionless III crypto conference in Salt Lake City, Utah’s Republican Senator Mike Lee outlined three major threats that could jeopardize the burgeoning cryptocurrency industry: the creation of a central bank digital currency (CBDC), inconsistent regulation by individual states, and overly aggressive federal oversight. Lee, alongside fellow Utah Congressman John Curtis, emphasized that the rapidly growing digital assets sector is at a pivotal crossroads as regulatory pressure mounts.

Senator Lee and Congressman Curtis both took a strong stance against current government policies, arguing that existing and potential regulations are encroaching on financial freedom and the innovation that cryptocurrency promises. “Instead of coming after you, we should be your protectors,” Curtis declared, underscoring his belief that the role of the government should be to foster, not stifle, the growth of the industry.

Lee vocally defended cryptocurrency’s use as a medium of exchange, directly challenging the U.S. Securities and Exchange Commission’s (SEC) stance that many digital assets qualify as securities. “Cryptocurrency is not a security. Cryptocurrency is not a commodity. Cryptocurrency is used as a medium of exchange,” Lee said, pushing back against the lawsuits the SEC has filed against crypto companies for allegedly failing to register their products as securities. He further argued that capital gains taxes on crypto transfers should not apply, positioning the digital asset as a currency rather than a tradable security.

One of Lee’s most impassioned critiques was directed at central bank digital currencies (CBDCs), which are being explored by governments worldwide, including China, whose digital yuan program is already in progress. The U.S. Federal Reserve is still in the assessment phase of a CBDC, but for Lee, such an initiative represents a direct threat to financial freedom. “A CBDC would enable even more financial surveillance,” Lee argued, suggesting that it would give the government far-reaching control over personal and business transactions, curbing the very freedom that decentralized cryptocurrencies aim to provide.

John Curtis echoed these sentiments and stressed the importance of bipartisan cooperation in Washington, particularly regarding efforts to roll back restrictive policies like the Staff Accounting Bulletin-121 (SAB-121), which placed stringent limitations on banks’ ability to hold cryptocurrencies. “I think it’s really important for all of us — all of you as you push this issue in Washington — to realize if it becomes a partisan issue, we will have a very, very difficult time,” Curtis said. He called on the crypto industry to engage lawmakers by educating them about the complexities of digital assets, dispelling their “fear of the unknown” and ensuring that the regulation debate doesn’t become bogged down by partisan politics.

Both lawmakers underscored the urgency of finding common ground between Republicans and Democrats on cryptocurrency policy. “We have to work with Democrats to find connection points and reach a consensus on regulatory policy,” Curtis added, pointing out the significant learning curve many lawmakers face when trying to grasp the technical intricacies of the crypto space.

As the cryptocurrency industry faces increasing scrutiny from regulatory bodies like the SEC and the Federal Reserve, the stakes are high. The trio of challenges outlined by Senator Lee — the potential imposition of a CBDC, fragmented state-by-state regulation, and heavy-handed federal oversight — could significantly reshape the future of digital assets in the U.S.

The conference ended on a note of caution and hope, with Lee and Curtis urging the crypto community to engage with lawmakers to prevent a regulatory overreach that could stifle one of the most innovative sectors of the modern economy. Both legislators believe that the right approach could lead to balanced regulations that protect consumers without hampering innovation. However, the path forward will require a coordinated effort between the industry and Washington.

Digital Assets Desk