Austin, Texas – The biggest news story of the year by consensus seems to be the political sea change taking place within the Democratic Party around crypto. President Biden's administration essentially inherited the same passive, adversarial approach to crypto as his predecessor, but has become actively hostile since the industry hit rock bottom in 2022 (the year of crypto hell). The easiest way to summarise Biden's “whole of government” attempt to crack down on the crypto industry is “Operation Chokepoint 2.0”, a tagline coined by venture capitalist Nick Carter to explicitly describe the suspension of banking for many crypto companies.
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However, in a matter of weeks, everything has changed. From the bipartisan votes in the House and Senate to repeal the SEC’s notorious accounting pronouncement (SAB121), to yesterday’s announcement that the Biden Administration is reportedly in the final stages of reaching out to crypto companies and soliciting input on what good crypto policy would look like, it’s become (almost) possible to believe that the political, regulatory and legislative future of the domestic crypto industry is bright.
That vibe is in the air, perhaps because everyone seems to be saying it out loud. For example, on the Consensus Stage yesterday, NYSE President Lynn Martin said that cryptocurrency won't remain a “partisan” issue for much longer. It doesn't make much sense to see cryptocurrency as inherently political, in the same way that stocks and bonds are largely apolitical (indeed, given the technical design of protocols like Bitcoin, it may be more plausible to say that cryptocurrency isn't actually apolitical).
But not everyone agrees on this point. For example, a prominent crypto lawyer who works for a hot DeFi startup, who requested anonymity given the sensitivity of his work, said he doesn't think Biden's change of heart is genuine. “If he's re-elected, he'll probably go back on track,” he said. Asked if he felt any weight had been lifted off his shoulders or that his job had become or would become easier in a seemingly improving regulatory environment, he replied, “Absolutely not.” Today is the same as yesterday.
Austin Campbell, a Columbia University business lecturer who is deeply involved in Washington political circles, echoed this sentiment, noting that the seemingly simultaneous changes in Congress are probably not permanent. Indeed, if you look at the votes on the landmark Financial Innovation and Technology Act of the 21st Century (FIT21), the vote was largely driven by age. This may be a positive in itself, but despite the fact that younger lawmakers are easier to “get” and that US politics is a gerontocracy, dinosaurs are not going to rule the world forever.
This morning, Messari founder Ryan Selkis, who recently spoke with former President Trump at the Mar-a-Lago Club, and Uniswap Labs lead attorney Marvin Amory, a longtime Democratic Party activist, took to the main stage to practically debate the political maneuvering that has been going on lately. Selkis' main argument was that the Democratic Party's softening of crypto is in large part the result of Trump winning the “single-issue” crypto vote and should be treated as suspect. Meanwhile, Amory argued that political change is not a flip of a switch, and that initiatives such as SAB121 and FIT21 are the result of true bipartisan cooperation and successful crypto lobbying.
“What I would say is, we don't necessarily want to be partisan, because that would be a setback in the long run,” Amoli said. In other words, cryptocurrencies should be wary of aligning themselves with any particular party or any particular candidate, especially considering that campaign promises are rarely kept. Meanwhile, Selkis wanted to move out of wishful thinking (i.e., maybe Democrats will suddenly support cryptocurrencies after years of trying) and into the realm of realpolitik (i.e., if the bipartisan support theory is true, it's because the needs of the Democratic Party have changed).
“Democrats right now are like cheating spouses. We caught them in the act,” Selkis said. “I think rewarding these Democrats at this point is not only foolish, it shows a serious lack of self-respect. They need to repent.”
