The Infrastructure Bill was the first shot in a long battle. But do lobbyists in Washington really understand the topic?
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.
ProShares’ Bitcoin Strategy ET, based on bitcoin futures, will land on the NYSE tomorrow under the ticker symbol $BITO.
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 after a $425 million Series D funding round.
The post Crypto-friendly remote hiring company Deel valued at $5.5 billion after Series D appeared first on The Block.
Binance has burned nearly 1.4 million BNB tokens (worth about $640 million at current prices) in its largest-ever burn.
The post Binance destroys nearly $640 million worth of BNB tokens in its largest-ever burn appeared first on The Block.
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
Crypto investment funds continue to see inflows, pushing total assets under management to an all-time high last week. Inflows reflect investor enthusiasm ahead of the first U.S. bitcoin futures ETF approval on Friday.
Total crypto assets held by Brazilians amount to nearly $50 billion now, compared to $16 billion held in U.S. stocks.
