Politico

Regulating crypto: the $2T Rubik's Cube

Crypto trading! Bitcoin! Dogecoin! Stablecoin! Even if lawmakers don’t understand blockchain, Capitol Hill is finally waking up to digital currency — Congress has introduced more than a dozen bills on crypto and blockchain this year alone — as lawmakers on both sides of the aisle go head to head over the best way to regulate the $2 trillion market. Economics reporter Victoria Guida joins Playbook co-author Tara Palmeri to talk about lobbying around crypto and the time her dog ate her Bitcoin.

On takeaways from the Senate’s September SEC oversight hearing on cryptocurrencies — and partisan split over the policy approach

“One of the things that’s difficult about crypto is that it’s developing so quickly, it’s changing so quickly. And that’s one of the things that’s really difficult about legislating it. And I heard this in some of my conversations with administration officials is basically like, you don’t want to be that specific necessarily in how you legislate crypto, because the way that the industry looks now might not be what it looks like in a year or two because this technology is developing so rapidly. And so that’s another thing that makes it really hard, particularly from a legislative standpoint, right? Like — government agencies take a while to do stuff, but Congress may only weigh in on things once every decade. And so that’s another thing that’s sort of difficult, because if you legislate on crypto, you kind of want to make sure that it’s going to work for at least a little while.” — Victoria Guida

On the crypto industry’s lobbying efforts in the bipartisan infrastructure package

“This was really the first time that the crypto industry really had to gear up and try and fight a bill because they had never been used as sort of a pay-for revenue item for legislation before. And I think to some extent, they were actually kind of caught off guard by that. But they’ve gotten a lot of powerful people on their side. … And so one of the things that we saw, too, was this sort of grassroots mobilization of people against the bill, and they were actually really able to kind of slow down the bipartisan infrastructure package in the Senate, although they ultimately lost. But I think that the force of their response, you know — they got Gene Simmons from KISS to tweet for them, and they had Jack Dorsey, who’s super pro-Bitcoin. I think that the fight that they put up kind of surprised people.” — Victoria Guida

On the fear of Treasury and the Fed that stablecoins could disrupt the financial system

“One of the reasons why stablecoins are getting a lot of attention from regulators right now is partially because of what they could be, which is they could be used as sort of payment tokens that we use on e-commerce sites. So there’s actually an organization called the Diem Association that’s affiliated with Facebook. And the way that they envision it is to have this sort of separate payment system that lives within Facebook. So you’d still have dollars in your bank account. But it would be almost like going to an arcade where you go buy tokens and then you can use those tokens for everything at the arcade. And so stablecoins could become this entirely separate ecosystem of payments. So regulators want to make sure that they really understand all the implications of that, including whether — when you’re done with the arcade — you can actually cash them back in and get the money back for the ‘tokens’ that you didn’t use.” — Victoria Guida

On whether we’re at a turning point

“I do think we’ve reached the point where people generally feel like crypto is something that they can no longer ignore, that it’s something that you’re going to have to decide what you think about it and what to do about it, which is no easy task. It’s kind of funny, too, because cryptocurrency were sort of originally designed with the idea of being outside of government. And so it’s really interesting because even within the crypto community, you have all these different factions. There are some companies whose entire business model is like, ‘Let’s design our business model to be within regulatory parameters. We’re going to talk with government agencies and be in line with what they want.’ But it’s not like the other part of the crypto community — the part that’s suspicious of government, wants nothing to do with them and wants a completely parallel financial system — has gone away.” — Victoria Guida

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