You don’t have to be a close observer of the crypto industry to recognize an uncomfortable truth: Crypto’s reputation in Washington, D.C., is damaged. While the industry has developed enduring relationships with a growing group of bipartisan lawmakers over the past several years, recent market turmoil and the ongoing saga of the collapse of FTX International taint the broader industry.
Many national lawmakers and regulators have become increasingly wary of the industry, and many have called for stricter regulations and oversight. While this is a challenging situation, it is also an opportunity to return to the key benefits of decentralized systems – privacy, transparency and economic freedom – helping to reboot the industry’s relationship with Washington.
Kristin Smith is the executive director of the Blockchain Association, a Washington D.C.-based crypto industry lobbying group. This article is part of CoinDesk’s Crypto 2023.
The key to re-energizing the conversation on crypto’s core benefits is the myriad merits of decentralization, which happens to be the core reason that many in this industry chose to embrace this technology in the first place. It’s the heart and soul of crypto, the ability to transact between individuals without the need for a centralized intermediary. It also happens to be the answer to much of the recent turmoil, including FTX and Celsius Network, to name a few.
Each of those failures was a failure of centralization, not the underlying technology that powers crypto.
We recognize that trusted intermediaries, like exchanges and custodians, play an essential role on the path to decentralization. But a core goal of this industry isn’t just to make minor tweaks around the edges of the legacy financial system or Web2. It’s to rebuild today’s flawed infrastructure from the ground up. Some may have gone too far down the path of centralization, and we’ve seen the results: spectacular crashes and business failures that echo past events from legacy industries.
Crypto is here for good – but can and should be better than the system we are trying to replace.
Following the failure of FTX International, it’s understandable that lawmakers want to do something, but they should be wary of passing legislation in haste that would do more harm than good.
Instead, Congress should take its time to investigate the issues we’ve seen and work closely with the crypto industry to find solutions that benefit everyone. But it’s not just lawmakers who need to do their due diligence. The crypto industry has a significant role to play in alleviating concerns and rebuilding trust. So how do we do that?
First, we must continue investing in our Washington presence. We have a strong advocacy apparatus in place, but we’re still far behind our competitors in traditional finance. With greater investment in teams of advocates, both internally among individual companies and in advocacy associations, we will have greater success at getting in front of lawmakers and promoting smart policy solutions.
Second, we need to double down on education and show the societal benefits that crypto networks provide. Decentralized finance, or DeFi, has the power to expand financial access to underserved communities, streamline business functions and democratize the digital ecosystem. By sharing that story through briefings and meetings with key policy stakeholders, we can show that crypto is truly here for good and promote a positive regulatory environment.
Finally, we need to continue building relationships with lawmakers. This is done by meeting lawmakers where they are, answering tough questions and being transparent about our operations and values. Additionally, we need to come to the table with good policy ideas to prove our commitment to a mutually beneficial policy framework.
The collective voice of crypto – a voice that has been here for years and will remain for years to come – represents something far greater than one man or one company. We represent the innovators, the builders, and the investors in our future working to build a better internet for all.
While our reputation has taken a few body blows, we have to double down on rekindling relationships and restoring trust to ensure we advance policies that will set us up for future success.