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Facing a head-spinning array of new legislative and regulatory action out of Washington, D.C., the crypto industry is reacting the way any sector flush with cash would: It’s throwing money at the problem.

Established trade associations are bulking up their lobbying operations, and individual firms seeking more bespoke treatment are hiring their own representatives from D.C.’s enormous pool of Congress-whisperers and regulator-persuaders.

The crypto industry is late to the game. With the exception of a few well-established trade groups, and some firms that saw the importance of having a seat at the federal table before it became painfully obvious, crypto companies have largely avoided engagement with Washington.

This article is part of Crypto 2022: Policy Week, a look at how regulators and legislators are shaping cryptocurrency and how the industry is fighting back.

As a whole, the industry has suffered from a “short-sighted lack of commitment to, and investment in, Washington,” said Miller Whitehouse-Levine, policy director for the DeFi Education Fund, a new Washington, D.C.-based organization that aims to educate policymakers about the benefits of decentralized finance and governance.

The lack of engagement was partly down to the deep vein of libertarian sentiment running through the crypto world, and partly a result of wishful thinking.

“There’s obviously a pretty anti-centralized authority streak throughout the industry, and the U.S. government is the biggest, baddest, centralized entity in the world,” Whitehouse-Levine said. “There’s just a natural aversion to engaging with it in the crypto industry.”

At the same time, he added, there was a misguided hope that crypto would “fly under the radar” of government regulators, much as internet firms did in the early days of the World Wide Web. “That has not been borne out in any shape or form,” he said.

A rude awakening

It’s difficult to pinpoint a moment when the industry really woke up to the need to have a larger presence in Washington. For some, it was as far back as 2019 when Facebook CEO Mark Zuckerberg faced intense pushback from Congress over the company’s plans to create a stablecoin called libra (since renamed diem). For others, it was in December, when outgoing Treasury Secretary Steve Mnuchin issued a proposed rule that would have barred many anonymous transfers of cryptocurrency.

But for most it was this summer, when the crypto industry was rocked by the news that an amendment attached to a bipartisan infrastructure spending bill would raise $28 billion in taxes from the industry by requiring cryptocurrency “brokers” to report transactions to the Internal Revenue Service. The trouble was the definition of “broker” used in the legislation was so broad it would have included bitcoin miners and software developers working on digital wallets.

The outcry raised by the industry’s representatives in Washington was enough to convince a number of influential members of Congress that the legislation needed to be changed, though a final version of the bill is still pending.

“The infrastructure bill fight made it real for a lot of people who weren’t paying attention to D.C., that D.C. is paying attention to crypto,” said Neeraj Agrawal, communications director at Coin Center, one of the handful of crypto-focused organizations that has been on the front lines of federal policy battles for years.

“The crypto industry as a whole kind of realized [it needs] to beef up lobbying efforts, or policy will be left to congresspeople who maybe don’t fully understand the technology, as evidenced by some of the language that was put into the infrastructure bill,” said Nisa Amoils, a securities lawyer and managing partner of A100X Ventures.

“The infrastructure fight, especially, really woke everyone up,” agreed Ron Hammond, director of government affairs for the Blockchain Association. He described the effort to change the language about brokers in the infrastructure bill as a unifying moment for the industry’s lobbying representatives.

“The core group of subject matter experts and lobbyists just said … ‘we’ve got to get together on this front,’” he said. “We all combined forces to be a big strong voice.”

Stablecoin regulation looms

The recognition that the industry can successfully wield influence on Capitol Hill comes at a time when crypto is facing a slew of new legislative and regulatory challenges.

In addition to the infrastructure bill, the President’s Working Group on Financial Markets is finalizing a set of highly anticipated recommendations that are expected to guide the regulatory treatment of stablecoins. Securities and Exchange Commission head Gary Gensler is taking every opportunity to say he thinks crypto markets belong under the SEC’s watch, and the Federal Reserve is about to release a report indicating whether or not the federal government ought to launch a central bank-backed U.S. dollar coin.

It’s on the question of how the government will treat the $100 billion-plus stablecoin market that the industry is likely to see clarity soonest. The President’s Working Group could deliver its findings at any momen; when it does it will be in the form of recommendations, not hard-and-fast rules.

Teana Baker-Taylor, chief policy officer of the Chamber of Digital Commerce, said it is possible that a regulatory framework for stablecoin issuers is something that could come together in the next 12 to 18 months.

It’s in that middle phase – where regulators and/or lawmakers turn recommendations into real policy – when D.C. lobbyists really earn their fees.

Unsurprisingly, Circle, whose USD coin (USDC) is the second largest stablecoin on the market, is also building up its lobbying presence.

Circle’s goal has always been to be subject to regulation, something the company’s founder and CEO, Jeremy Allaire, has been saying for years. But the path to some sort of regulatory certainty is a tricky one, made even more so by Circle’s biggest competitor, Tether, and its eponymous dollar-denominated stablecoin. Tether has spent years sparring with regulators and law enforcement agencies over whether it truly holds the reserves necessary to back tether’s nearly $70 billion market capitalization.

On top of trying to distance its client from Tether, Circle needs to allay the concerns of the Biden administration that stablecoins and other digital assets are making it easier for the perpetrators of ransomware attacks to get away with their victims’ money.

“We will continue to advocate for effective policies that position the U.S. as a global leader in fostering the growth of new digital economic infrastructure. We know that, much like with the creation of the internet, it’s only through rigorous public-private sector collaboration that people everywhere will be able to tangibly benefit from public blockchains and we are engaging with policymakers to make that a reality,” Dante Disparte, Circle’s chief strategy officer and head of global strategy, said in a statement provided to CoinDesk.

More money, fewer problems?

Even before the infrastructure bill came to light and the issue of stablecoin regulation began to heat up, the industry was beefing up its lobbying muscle.

Lobbyists who work with Congress have to file regular disclosures indicating for whom they work, how much they are being paid and on what specific issues or pieces of legislation they are working. The data is compiled into a searchable database by the government transparency organization Open Secrets.

That database shows the Blockchain Association spent $290,000 on in-house and external lobbyists in 2020. This year it spent $290,000 by the end of June, the most recent filing date.

The Chamber of Digital Commerce, another lobbying group, in 2020 spent $120,000 and listed just one in-house lobbyist working on its behalf. Through June 2021, the organization had already spent $92,000 and listed four lobbyists, three from the firm FS Vector, which began representing the Chamber in April.

How do you form a PAC? Asking for a friend

— Barry Silbert (@BarrySilbert) August 6, 2021

In addition to increased spending by the trade groups, individual companies in search of bespoke representation have been adding both internal and external lobbyists to their teams.

Coinbase has been increasing what it spends on lobbying every year since 2017, and shelled out $230,000 last year. By June of this year it had already spent $160,000 and had increased its roster of registered lobbyists from seven to nine.

Ripple Labs, which spent $330,000 in 2020, has blown past that figure already, spending $550,000 through June. Since 2019, the firm has doubled the size of its stable of lobbyists, from six to twelve. The firm knows the dangers of Washington better than most, having been taken to court by the SEC last year over sales of its XRP token, which the agency alleges amounted to an unregistered securities offering.

The spending figures for the third quarter of the year haven’t been released yet, but the trend is clear. In the months since the infrastructure fight began, well over a dozen new disclosures have been filed documenting new lobbyist hires by crypto firms and trade groups. For many, it was their first recorded hiring of a lobbyist.

That includes Hedera Hashgraph, which has been represented by Key Bridge Advisers since Aug. 31.

In a statement provided to CoinDesk, Brett McDowell, executive director of the Hedera Council, explained the organization’s thinking, saying, “The Council Members and the broader Hedera community have an interest in ensuring that legislators and regulators, in the U.S. and elsewhere, are well-informed about distributed ledger technology and the broad range of issues faced by those who are building valuable businesses that leverage the technology or otherwise participating in the industry.”

Another firm new to the game is Digital Currency Group, the owner of CoinDesk, which hired its first lobbyist, the Klein/Johnson Group in April, and took on Capitol Counsel in August.

Not all bids to influence federal policymakers are taking the form of traditional lobbying operations. Andreessen Horowitz (a16z) recently launched a new $2.2 billion crypto venture fund and has hired, among others, former federal prosecutor Katie Haun, who investigated the Mt. Gox hack; Bill Hinman, the former director of the SEC’s Division of Corporation Finance; Tomicah Tillemann, a former adviser to Joe Biden and Hillary Clinton; and Brent McIntosh, a former Treasury Department official who specialized in the regulation of digital assets.

While none of a16z’s hires are officially lobbyists, several were expected to be in Washington for meetings with the administration and Congress this week. The plan was to raise awareness of a lengthy proposal a16z released last week for regulating what it refers to as Web 3, which it defines as “a group of technologies that encompasses blockchain, cryptographic protocols, digital assets, decentralized finance and social platforms.”

Also last week, Coinbase revealed what some of its recent policy hires have been up to. The largest U.S. crypto exchange by daily trading volume, which went public this year, released a model regulatory structure for the crypto industry. The proposal called for separating digital assets from the existing financial regulatory structures by creating a single regulator for digital asset markets.

The object, said Coinbase Chief Policy Officer Faryar Shirzad, is “to start an open and participatory national conversation on the future of our financial system.”

A ‘cash grab’

There are signs that not all the money the crypto industry is pumping into Washington is being well spent. Experts at some of the established advocacy groups said they were surprised at the large number of lobbying firms being hired, because the number of lobbyists with true expertise in the subject matter is relatively small.

On the other hand, lobbyists can be very persuasive.

“There’s an industry with a lot of money, and lobbyists are really good at seeing opportunities. So it’s not surprising to me that there’s a marriage happening there,” said Agrawal, of Coin Center.

But while lobbying firms may talk a good game on conference calls with their potential clients, it’s in the halls of Congress where the rubber meets the road. There, the results of the latest spending splurge have been uneven, at best.

“It’s a bit of a cash grab right now,” said one Capitol Hill staffer who works on crypto issues. Many of the newly minted crypto lobbyists, the staffer said, don’t really know what they’re doing.

“I deal with people all the time who aren’t good at their job, and with some of the newer folks it’s painful,” the staffer said. “I don’t want to have to explain to you how to do your job and you make money off of it.”

The staffer urged industry participants looking for representation in Washington to understand that a good lobbyist will sometimes have to tell clients things they don’t want to hear. If that’s not happening, it’s a good idea to maintain “a healthy level of skepticism.”

Another Hill staffer close to crypto issues said it’s obvious that some of the firms hiring lobbyists right now have been prioritizing access over subject matter knowledge.

“They’re hiring people who have a good foundational lobbying background, and teaching them as they go,” the staffer said.

‘Maximizing resources’

The situation reminds Baker-Taylor, of the Chamber of Digital Commerce, of the market for legal representation crypto companies faced several years ago.

“Five years ago, everybody was looking for lawyers that could help guide and advise them,” she said. “And we all knew the lawyers were learning on the job.”

“There are two elements here,” she said. “There is understanding the subject matter that you’re advocating for at a level of technical and commercial detail. That’s critically important. … And then there’s understanding how Washington works. And I think that there are people who are good at one of those, but there’s not a lot of people who are great at both. I think that that’s part of an industry that’s maturing.”

Whitehouse-Levine, of the DeFi Education Alliance, said crypto companies need to be more careful about who they hire to represent them. “You can’t just hire a lobbying firm here in D.C. and then forget about it except for paying the retainer once a month. To maximize those resources will require a massive amount of education before lobbyists can be depended on to get out there and educate.”

The DeFi Education Alliance is in the process of hiring lobbyists, Whitehouse-Levine said, and it is doing so very deliberately.

“We put together a briefing book of ‘DeFi 101′ readings that ended up being 450 pages that we’re going to ask our firms to read before getting started,” he said. “We also intend to do a five-day sprint curriculum to try to get our lobbyists up to speed.”

The good news is that once those lobbyists know their stuff, they’re going to find a willing audience among many members of Congress who, just a few years ago, didn’t want anything to do with crypto issues.

“Early on, on the crypto lobbying side, most members didn’t want to go down the rabbit hole,” said Hammond, of the Blockchain Association. “It was just so complicated and so daunting to know that you have to invest so much time into it. But now it’s getting to the point that they understand they have to learn this issue.”

These days there is as much outreach coming from Congress as there is going in the other direction. “It’s not as much me reaching out as the opposite,” he said, with congressional offices asking the industry to help educate senators and members of Congress on the issues.

“There’s a big thirst for education on both sides of the aisle,” Hammond said.

Also part of Policy Week

Stablecoins not CBDCs: An interview with Rep. Tom Emmer

Introducing Crypto 2022: Policy Week

Every major American issue seems to get sucked into the “red vs. blue” political dichotomy these days, and now it is cryptocurrency’s turn in the barrel. Following somewhat tense recent testimony between U.S. Securities and Exchange Commission Chairman Gary Gensler and the Senate Banking Committee, Politico confidently declared “Crypto becomes partisan.”

While Capitol Hill fireworks might make it seem that way, the reality is that crypto doesn’t have a natural partisan bent – it is a universal tool that has the potential to benefit everyone in every community.

Kristin Smith is executive director of the Blockchain Association, a Washington, D.C.-based lobbying group. This op-ed is part of CoinDesk’s “Policy Week,” a forum for discussing how regulators are reckoning with crypto (and vice versa).

Attempting to frame cryptocurrency as either a Republican or Democratic-leaning technology demonstrates a woeful lack of understanding about digital currency and its origins. Bitcoin emerged during the Great Recession, a period when millions of Americans were suffering due to the cascading failures of centralized-government watchdogs and large, overly-powerful financial entities. Crypto innovators wanted to create a system that gave everyday Americans complete control over their financial futures and their digital lives.

By the tenets of decentralization, digital currencies are designed to be inherently inclusive and open to all. Whether you live in Manhattan, New York, or Manhattan, Kansas, and have the ability to go online, you have equal access to blockchain networks and all their benefits.

That’s one reason why crypto’s public popularity is growing. According to one survey, roughly 46 million Americans own some form of digital currency, and a clear majority of the country would consider owning it in the future. Crypto’s growth won’t just benefit those who have always had access to traditional financial markets and services. According to a study by NORC at the University of Chicago, cryptocurrency traders are younger and more diverse along racial and ethnic lines as well.

The universality and open access to digital currency makes it impossible to be inherently partisan, which is why bipartisan groups of lawmakers support it. Progressives like Rep. Ro Khanna and Rep. Eric Swalwell and conservatives like Sen. Pat Toomey and Sen. Cynthia Lummis, who have sharp ideological differences in most areas, all agree that nurturing crypto growth represents a common good for all Americans.

Lost in the partisan bickering and media analysis from the Washington-based press are the real world benefits that crypto networks provide to users. A central benefit in the era of constant data hacks is that blockchain networks are significantly more secure, given the nature of decentralization. If the network’s data is stored across thousands of computers, it’s that much harder for hackers to access a meaningful entry point to collect and exploit users’ data.

How about basic access to financial services? According to research by the Federal Deposit Insurance Corporation (FDIC), roughly 7 million Americans still lack access to a bank account – people living in areas ranging from rural areas to urban centers. Many of these people struggle because of the entry costs of opening or maintaining a bank account or because they have trouble getting to a physical bank.

By moderating the power of traditional middlemen such as banks and other financial clearing houses, blockchain networks offer users a much easier and more cost-effective option to handle their money. They eliminate onerous fees, remain accessible 24/7 and, frequently, process transactions faster.

We have not yet touched on the power of decentralized finance (DeFi) protocols to open up the financial services universe even further. Crypto lending platforms, like Compound and Aave, have the potential to revolutionize peer-to-peer, global lending practices. Filecoin, the decentralized storage network, is taking steps to completely change the way we think about storing our most important data.

See also: Rep. Tom Emmer Wants Stablecoins Over CBDCs – Interview

And, if we return to a source of the last financial crisis, DeFi protocols could open up another market: home loans and mortgages. What if a DeFi protocol could be designed to constantly analyze all available mortgage offers to ensure that a client got the best deal possible, rather than relying on the traditional process where a user is at the mercy of whatever rate their bank is willing to give them?

Surely the scenarios described above could be considered non-partisan. We believe they enjoy broad support among the American people, and likely in Congress too, if we strip away the tried “red vs. blue” comparison that we’ve been so conditioned to think is natural. We have a choice: continue to nurture the nascent crypto industry in this country or let the demons of our partisan political system hamper the next wave of cutting edge financial technology.

This episode is sponsored by NYDIG.

Download this episode

Today on “The Breakdown,” NLW rounds out the story of the bitcoin futures ETF process that has dominated crypto chatter for the last week or more. He looks at the details of the first ETF that will go live, as well as why some on Twitter argue this is really just a product for short-term traders. Finally, he looks at the significance of news that Grayscale will endeavor to convert its bitcoin fund into an ETF.

See also: ProShares Bitcoin Futures ETF to Start NYSE Trading on Tuesday

“The Breakdown” is written, produced by and features NLW, with editing by Rob Mitchell and additional production support by Eleanor Pahl. Adam B. Levine is our executive producer and our theme music is “Countdown” by Neon Beach. The music you heard today behind our sponsor is “Only in Time” by Abloom. Image credit: George/Moment/Getty Images, modified by CoinDesk.

Guggenheim Chief Investment Officer Scott Minerd says he’s no longer invested in bitcoin after he predicted earlier this year that the cryptocurrency could hit $600,000.

• “The one thing I learned as a bond trader years ago, when you don’t understand what’s happening, get out of the market,” Minerd said in an interview on CNBC from the Milken Conference in Los Angeles. “So discipline tells me now I don’t fully understand this.”
• He pointed out how if someone had invested in $1,000 in the Shiba coin in February, they would have made $2.1 million today.
• In February Minerd predicted that bitcoin could hit $600,000 after saying in December that bitcoin could reach $400,000. In late June, Minerd predicted that bitcoin could fall to $10,000 to $15,000 at its low point. Bitcoin today is trading over $63,000 and has climbed more than 40% this month.
• “We were long going into that, we sold, it pulled back to where I thought it was and really after looking at it thought you know, we gonna probably go lower,” Minerd said. “Well, we didn’t, so we’re not in.”
• In November, shortly before Minerd’s first bullish price prediction, Guggenheim filed an amendment with the U.S. Securities and Exchange Commission (SEC) to be able to invest up to almost $500 million in bitcoin through the Grayscale Bitcoin Trust (GBTC), which is a unit of Digital Currency Group, CoinDesk’s parent company.

San Francisco-based remote hiring company Deel is now valued at $5.5 billion, following a fresh Series D funding round of $425 million. 

Coatue, which has invested in technology companies including DoorDash, Instacart and Spotify, led the round. Firms including Altimeter Capital, Andreessen Horowitz, the YC Continuity Fund, Spark Capital, Greenbay Ventures, and Neo also participated in the deal.

Deel helps companies such as Coinbase manage compliance and payroll for remote employees. Deel revealed a tool in Nov. 2020 that allows international workers to be paid in cryptocurrencies, which requires a Coinbase account.

in an Oct. 18 press release, Deel called itself the “highest valued company in the global hiring, payments, and compliance space with this investment.” 

The hiring company has raised an impressive amount of capital in just a few years. Founded in 2019, Deel has now raised more than $630 million. It reached unicorn status after closing a $156 million Series C round in April, and now counts more than 4,500 customers. 

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

Crypto exchange operator Binance announced Monday that it has burned nearly 1.4 million BNB tokens (worth about $640 million at current prices) in its largest-ever burn.

Burning refers to the process of permanently removing a crypto token from circulation, thereby reducing its supply and potentially increasing its price. When Binance launched BNB in 2017, it committed to burning a total of 100 million BNB, i.e., 50% of its total supply. BNB’s 40% supply was originally allocated to the Binance team.

The latest burn — Binance’s 17th quarterly BNB burn — is the largest ever in dollar terms, though not by the number of tokens. This is because the price of BNB jumped 58% during the third quarter, from around $305 to around $480.

The company has burned 16.60% of the BNB supply to date, according to The Block Research. Binance burns BNB each quarter based on its trading volumes of the previous quarter.

© 2021 The Block Crypto, Inc. All Rights Reserved. This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

French banking major Société Générale is looking to acquire a cryptocurrency custodian or at least take a strategic stake in one, according to three people familiar with the bank’s plans.

The bank, often nicknamed “SocGen,” has also sent out a request for proposal (RFP) in search of firms that could provide safe-keeping of cryptographic keys and provide trading functionality on the bank’s behalf, the sources confirmed.

SocGen may be playing catchup with the likes of BNY Mellon, BBVA and Standard Chartered as banks look to crypto custody as a gateway into the booming, $2.5 trillion sector.

According to one of the sources, SocGen is eyeing two Swiss firms in particular: Metaco and Taurus. (Notably, Metaco provided crypto custody technology to BBVA and GazpromBank’s Swiss outpost.)

Meanwhile, Taurus recently joined forces with Credit Suisse to create Ethereum-based shares in a Swiss resort.

SocGen, Metaco and Taurus all declined to comment.

Curv ball

Interest has picked up on the M&A side of things regarding digital asset custody, thanks in part to PayPal’s acquisition of multi-party computation (MPC) shop Curv, first reported by CoinDesk in March. The upshot of the acquisition was that Curv’s existing clients were given until the end of this year to find another provider.

“When PayPal acquired Curv, the impact of that was that they not only acquired the firm but they took it off the market,” a key player in the crypto custody space told CoinDesk. “All those customers have had to scramble and look for alternatives.”

Paris-headquartered SocGen, the sixth-largest bank in Europe, is no slouch when it comes to crypto.

Read more: Société Générale Applies for $20M MakerDAO Loan Using Bond Token Collateral

Earlier this month the bank submitted a proposal on the governance forums of decentralized finance (DeFi) giant MakerDAO to accept on-chain bond tokens as collateral for a DAI stablecoin loan.

SocGen’s blockchain division, FORGE, also has a history of experimenting with public blockchains.

There’s nothing that screams techno-optimist about U.S. Rep. Tom Emmer, the four-term Republican member of Congress from Minnesota. The 60-year-old is a collector of toy trains and tractors. He first learned about cryptocurrency in a book. In a memorable scene from the coronavirus pandemic months, Emmer appeared upside-down on video during a congressional hearing.

But Emmer understands cryptocurrency better than most – especially among his peers in office – and has emerged as one of the industry’s fiercest political advocates. Decentralized technology is “inevitable,” he says, and elected and appointed officials can either support the growth of a homegrown U.S. crypto sector or see it advance elsewhere in the world.

This interview is part of a series called “Gensler for a Day,” where we ask industry leaders in a position to set or influence law about concrete policies they would implement. Check here for more “Policy Week” coverage.

“I’ll go down any rabbit hole when it comes to this because you’ve got to learn it, you’ve got to understand it,” Emmer said last week in a phone interview, reprinted below, on his legislative efforts in the House of Representative. “You do have to play with it a little bit. You got to touch it, you got to smell it, you got to manipulate it, see if you can throw it, catch it.”

Emmer is a powerful ally to have on Capitol Hill. In addition to co-chairing the Congressional Blockchain Caucus, which works to educate other legislators, he is chairman of the National Republican Congressional Committee (NRCC), which works to elect more Republicans to Congress, and is a ranking member of a powerful financial oversight subcommittee.

But his crypto-related work can be seen as an uphill battle. Emmer has spoken at length about how the digital asset industry is already “over-regulated.” Among policymakers, he’s also identified something of a bias against digital privacy and private monies. And now that Congress sees the $2 trillion (and counting) cryptocurrency industry as a potential tax revenue source and a driver behind a growing ransomware problem, there are risks of heightened oversight or misinformed policy being shoehorned into unrelated legislation.

See also: Here’s How the US’s Infrastructure Bill Crypto Tax Provision Might Be Implemented

Emmer recently put forward or co-signed a series of bills looking to clarify cryptocurrency regulation. His “Securities Clarity Act” would work with the “Digital Commodities Exchange Act” to answer once and for all when a cryptocurrency network or company should be overseen by federal securities regulators.

Crypto is one of the few areas that seems to transcend partisan, left versus right, politics. Many Democrats and Republicans see the technology as transformative, hold bitcoin and incorporate it into their brands (check out these campaign non-fungible tokens [NFT] – from blues and reds).

Emmer is a leading voice in this pro-tech camp, but like all decent politicians he knows this policy issue isn’t about him. Crypto, he says, is for the people.

In a recent interview on CoinDesk TV’s “First Mover” you suggested the government is looking at crypto as a potential revenue source. Are you opposed to the notion of taxing crypto in general and what would sensible policy look like here?

I’m absolutely opposed to the [Oregon Sen. Rob] Portman amendment in the [Biden administration’s] bipartisan infrastructure bill, because I think it was based on, I don’t want to say a false premise, but I just don’t think the $28 billion they expected to collect off of this tax [would be forthcoming].

First, let’s back up. Americans realize the value of crypto and blockchain innovation – and it’s those people who could be harmed by misguided legislation.

That debate over on the Senate side of the Capitol seems to have awakened some elected officials and their staff. When a Senate office receives 40,000 calls in one day, Daniel, like they did during the debates over the infrastructure bill, it really forces those elected representatives to care. It started with the idea of taxing the industry as a revenue source but it turned into a lot more. A lot of heads are popping up out of the sand saying, “What is this crypto thing?”

You know, I had no idea 55 million Americans are now involved in crypto. It’s got a market of more than $2 trillion. It’s one of the fastest-growing things that we’ve seen in decades. Because of all of that, the government is taking notice.

Along those lines, it looks like the “crypto provision” is going to be passed intact within the infrastructure bill. Do you think that matters?

We’ll have to see what happens with the bill. Depending on what room you’re in and with whom you’re talking, it’s either coming together slowly or it’s going farther apart. If we start with the hypothetical that the bill finds its way back to the floor and passes the House, gets signed by the president’s office and becomes law, that provision would be in there. But it’s not effective until 2023, so we will have time to change it. Is it the optimal situation, Daniel? No, I prefer that [language] never got there. But I’m confident that cooler heads will prevail – that amendments will be made – and we will be able to take action.

What does overregulation look like and how big of a risk is it?

Just take a look at our [U.S. Securities and Exchange Commission] Chair Gary Gensler if you want to know what overregulation is all about or why creating laws, if you will, through enforcement or regulatory enforcement is bad.

As I told him during a hearing [earlier in October], his conclusory public statements and threatened enforcement actions hurt everyday investors the most. Gensler actually believes that most tokens are securities – or at least he claimed to believe that most tokens are securities – because people buy them and expect to profit off of the work of developers and computer scientists. Since he thinks that most tokens are securities, he also believes that crypto exchanges that trade securities should be under SEC jurisdiction. These are his words.

I asked him specifically if someone who issued a token goes to register it with the SEC if they can trade on the New York Stock Exchange or Nasdaq. The answer right now is no. It couldn’t. I believe the most tokens are commodities or currencies once the project is decentralized.

We’ve got to remember this technology is decentralized after a project is fully developed, there’s no centralized group behind it, whose work investors would be profiting on. So at that point it should not be a security.

I’m going to suggest to you that Gary Gensler and other members of the [Biden] administration are ignorant as to how this area works, which is a big problem for the industry. I don’t believe that, though, I believe he’s very smart and he’s trying to expand his jurisdiction.

See also: Gary Gensler Says Crypto Is a ‘Wild West.’ Others See Pure Capitalism | Opinion

I’ll give you an example. He talks about “stable-value” coins. There is no such thing as a “stable-value” coins – they’re stablecoins. He used this term in his testimony before the Banking Committee in the Senate and in his testimony before the Financial Services Committee in the House. Why would he use that term? Did he just fumble with the words? No. Stable value funds are under the SEC’s jurisdiction, which might suggest “stable value” coins would be, too.

This throws the whole investment marketplace into a confused state. That is bad for individual investors and, frankly, I believe violates his mandate, which is to protect individual investors.

If you were in Gensler’s shoes, what would you do about stablecoin regulation?

I’ve got a bill out there right now called the Securities Clarity Act to try and deal with this problem of the overreaching regulator. A little clarity would go a long way towards solving this jurisdictional question between the SEC and its sister agencies. [Ed. note: Namely, the Commodity Futures Trading Commission.]

The bill would help token issuers easily determine when a token is actually part of a securities contract and when it’s not. You wouldn’t do this by amending the existing securities law, but in creating a new definition called an “investment contract asset.”

This particular bill would help the SEC understand what its jurisdiction is and encourage it to work with the industry to develop a bigger framework that we can all operate under. Then there is the sister bill carried by former Ag Chair [Kenneth Michael] Conaway (R-Texas). My office has been working with Republican ranking member “GT” Thompson (R- Pa.) of the [House Agriculture Committee] on this bill, which would give the CFTC the authority to regulate crypto spot markets, which are the crypto exchanges, obviously. This way, crypto exchanges can have one federal regulator rather than going through the burdensome process of getting 53 different licenses to operate across the United States.

The Securities Clarity Act in combination with the Digital Commodities Exchange Act, which is that other bill, will clear up jurisdictional boundaries and allow the marketplace to do what it does best: allow investors to do their homework, get involved in projects and grow new opportunities for themselves and others. That’s what makes this country great.

Shifting gears a little bit, do you think the United States needs a central bank digital currency (CBDC). And, if so, how can we guarantee strong privacy rights in digital public money?

By now people have to know that I am absolutely, adamantly opposed to the United States government or Federal Reserve, specifically, creating a central bank digital currency.

If it’s permissionless and maintains the privacy of cash, I suppose that’s workable. But until you can prove that would work, I adamantly oppose one. The Federal Reserve should never be competing with private business.

There are two main forms of a CBDC. One would impose central bank accounts, users would have bank accounts at the Fed. The Fed would collect KYC [know your customer] information on users and then be able to track their transactions. This is modeled, I would argue, after the Communist Party of China. This is the United States of America. Why would we ever want to emulate the Communist Party of China? I just disagree that we should never mobilize the Fed into retail banking.

The second way would have financial institutions like banks maintain all KYC information and serve as access points. [CBDC supporters will] probably try to argue this is better for financial institutions – but the Fed would still be able to track all transactions on the blockchain.

Bottom line is, CBDCs aren’t much different than swiping a credit card or a debit card, besides the fact that the central bank is involved and can oversee transactions. Neither one of these examples would maintain any element of privacy. [Meanwhile], stablecoins actually maintain certain elements of cash because they run on open, permissionless and private blockchains. That’s probably your best solution. The government should allow private citizens to develop this thing.

See also: Regulate Stablecoins, Don’t Smother Them | Michael Casey

You said in an interview last spring that crypto is succeeding in part because people are losing faith in the system. Is there a way to square the support of crypto with the American Dream?

Crypto started, right, with Satoshi’s white paper released after the 2008 crash. I think this all comes out of the fact that the United States’s monetary policy, as well as the monetary policy around the globe, is suspect. When a government has a floating currency, when it can seemingly print as much cash as it wants, that’s good until it’s not.

We’re going to back this up. The people who started the crypto craze, way back when, they’re kind of like the financial preppers of our day. They were trying to anticipate a country where you couldn’t trust the currency. Bitcoin is a lot like gold. It holds its value.

I do think it’s compatible with the American Dream because Americans have always been pushing the frontier. Americans have always been free to innovate and this is what our government is going to have to understand: This is going to happen. It’s not a matter of if, it’s a matter of how far.

If our government wants to continue to put up roadblocks because of ignorance, because of fear, if you will, and the desire to control, [the crypto sector will] develop elsewhere. You’re going to have very intelligent, creative Americans and others that continue to develop new methods for transacting between individuals and or entities. Crypto is not going away. It’s just a matter of whether we will have a light touch regulatory framework that recognizes the potential crypto presents. This is an entirely new opportunity for different groups of people who may never have had access to the financial system.

See also: How Do You Know Crypto Is Winning? Look Where the Talent Is Going | Opinion

That’s why I’ve been so outspoken, I want to see that happen right here in this country.

How far down the rabbit hole have you gone? Do you hold bitcoin, play around with decentralized finance?

Well, every time they open another door or trap door, if you will, I fall into it. Personally, I’m going to be careful, because I can tell you I know people very close to me that are actively involved in this marketplace. I will tell you, on an official level, more policymakers need to understand this industry.

A while back we started accepting cryptocurrency for campaign contributions. We did that in selfish self-interest. But if you think about it, we’re trying to appeal to my colleagues and their selfish self-interest, who might notice I started accepting cryptocurrency in my campaign and ask, “What is he getting that we’re not?”

I’ll go down any rabbit hole when it comes to this because you’ve got to learn it, you’ve got to understand it. You do have to play with it a little bit. You got to touch it, you got to smell it, you got to manipulate it, see if you can throw it, catch it. For some of us my age – we weren’t built the same way you were, Daniel, so it takes us a little bit longer – a virtual wallet is something that you really need to get used to.

More from Policy Week

Nik De: What I Learned About Crypto Regulation From a Week in DC

David Z Morris: Lassoing the Stallion: How Gensler Could Approach DeFi Enforcement

Bitcoin ETFs Aren’t New. Here’s How They’ve Fared Outside the US

Some NFTs Are Probably Illegal. Does the SEC Care?

Stablecoins Not CBDCs: An interview with Rep. Tom Emmer

Crypto Learns to Play DC’s Influence Game

Gensler for a Day: Regulating DeFi With Fireblocks CEO Michael Shaulov

Kristin Smith: Crypto Is Too Big for Partisan Politics

Raul Carrillo: In Defense of OCC Nominee Saule Omarova

DeFi Is Like Nothing Regulators Have Seen Before. How Should They Tackle It?

Gensler for a Day: How Rohan Grey Would Regulate Stablecoins

Investors piled into crypto funds last week ahead of the U.S. Securities and Exchange Commission’s (SEC) approval of the nation’s first futures-based bitcoin exchange-traded fund (ETF) on Friday.

The rise of fresh capital contributed to a boost in total assets under management, now $72.3 billion, the highest on record, according to a report Monday by CoinShares.

The increase came as bitcoin’s price surged 12% last week, pushing above $60,000 for the first time since April.

Inflows to crypto funds totaled $80 million for the week ending Oct. 15, down from $225 million of inflows during the prior week.

The SEC approved the ProShares Bitcoin Futures ETF on Friday, and the product will begin trading on the New York Stock Exchange on Tuesday.

The tracking of flows into the ProShares ETF will be included in next week’s CoinShares report, a representative for the asset manager wrote Monday in an email to CoinDesk.

The U.S. ETF approval “could prompt further significant inflows in the coming weeks as U.S. investors begin to add positions,” CoinShares wrote in the report.

For now, bitcoin funds continue to dominate inflows, totaling $70 million last week. Polkadot and Cardano products also saw inflows totaling $3.6 million and $2.7 million, respectively.

Ethereum funds saw minor outflows totaling $1 million last week.

Brazilians acquired $496 million in cryptocurrencies in August and have already acquired $4.27 billion so far in 2021, the country’s Central Bank (BCB) disclosed on Friday.

According to the Brazilian monetary authority, May was the peak of cryptocurrencies’ acquisition, with $756 million in purchases. Since then the figures have dropped to $695 million in June and $583 million in July, but were still higher than in February and March, when $386 million and $357 million were acquired, respectively, Brazilian media outlet Portal do Bitcoin reported.

Doing a mark-to-market estimation, total digital assets held by Brazilians would add up to nearly $50 billion, compared to $16 billion held in U.S. stocks, BCB’s monetary policy director, Bruno Serra, said on Friday.

In August, BCB’s president, Roberto Campos Neto, said that Braziliians held about $40 billion in cryptocurrencies.

“It’s a very big business, it attracts the attention of regulators all over the world, it’s not just in Brazil,” he said.

According to Serra, Brazil’s monetary authority has a “very controlled foreign exchange market” that allows it to be aware of crypto-related transactions. “We have foreign exchange contracts for all transactions, 100% of them we are able to map,” he said.

As of August, the transfer of ownership of cryptocurrencies between residents and non-residents began to be disclosed by the Central Bank in the goods account of the payments balance, Portal do Bitcoin reported, adding that cryptocurrencies are conceived as goods – non-financial and produced assets – following the IMF’s  methodological recommendation.

According to Serra, crypto investing is a search for wealth diversification by investors. “I think this offshore diversification dynamic is a dynamic that may be here to stay. Diversification channels have opened up a lot. Foreign exchange regulations are loosening in this regard; it’s something we need to address,” he said.

“It’s a one-way flow. Because of the cost of energy, Brazil does not produce crypto assets. It is only an importer,” Serra added.