This month, the Blockchain Association, crypto’s leading trade association in Washington D.C., marks its fifth anniversary. The lobby shop now has 114 member companies, per a press release today, including big names like Coinbase, Kraken, CoinFund, Pantera Capital, Ripple and Uniswap.
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It has an unwavering mission to “advance the future of crypto in the United States, promoting the potential of blockchain technology and shaping policy that ensures its success,” the release said. And that’s surely something most of us can get behind, whether we’re working directly in crypto or observing it in the media. But these are tough times for crypto in the capital. Following the collapse of FTX last November, and a string of scandals preceding it, the industry is struggling to get its message across to lawmakers and regulators. Many members of Congress are openly hostile to crypto’s goals, and the days when Sam Bankman-Fried could get dinner with any big D.C. fish are long gone. Congress members are wary of political contributions and wary of speaking too fulsomely of helpfully regulating an industry that has often lost voters money. There are few votes in championing Web3 anymore.
So has the Blockchain Association failed? You could argue that. In the last five years, Congress has not passed any comprehensive crypto legislation and it doesn’t seem likely to any time soon. We’ve seen plenty of thoughtful bills proposed, including the second iteration of one from U.S. Senators Cynthia Lummis and Kirsten Gillibrand, and a Republican-supported stablecoin bill has received strong backing from key members of the House Financial Services Committee. But, with Gary Gensler’s launching a series of noisy enforcement salvos against companies like Coinbase, Kraken and Binance (and Binance’s U.S. subsidiary), many continue to complain about a lack of regulatory clarity.
And, indeed, some have had enough of the U.S. entirely, choosing bases of operations in jurisdictions with more favorable and transparent regimes.
I spoke to Kristin Smith, who has led the Blockchain Association for the last five years, about what her organization’s main achievements have been over that time. She points to three.
First, she said, the association helped beat back a proposed rule from the Financial Crimes Enforcement Network (FinCEN), the U.S. Treasury’s money laundering watchdog, requiring exchanges to collect personal information on unhosted or self-hosted crypto wallets. Second, the association, she said, helped water down a crypto tax and expansive reporting requirement contained in President Joseph Biden’s 2021 omnibus infrastructure bill. Third, the association has helped member companies, such as Ripple, Coinbase and Grayscale, to push legal arguments as they fought Securities and Exchange Commission actions against them. But you might call all these wins as maintaining the status quo rather than advancing the industry’s interests in a more positive direction. They are aimed at protecting businesses in an uncertain environment, instead of creating a world where crypto knows where it stands legally speaking.
Of course, nobody could have expected that SEC Chair Gary Gensler would have turned into such a crypto hawk. When he came to office in April 2021, he was widely seen as an industry ally, someone who had taught blockchain tech at MIT and understood its goals. In an op-ed for CoinDesk in December 2019, he had written “I remain intrigued by Satoshi’s innovation’s potential to spur change – either directly or indirectly as a catalyst. The potential to lower verification and networking costs is worth pursuing, particularly to lower economic rents and data privacy costs, and promote economic inclusion." Four years later, Smith, who is otherwise careful in her wording, is unabashed in calling Gensler “an enemy” of the industry.
It’s true, too, that no one could have foreseen that Sam Bankman-Fried would go from a golden boy feted across the capital’s salons and steakhouses to being a defendant in a series of federal prosecutions that could land him in prison for decades. That isn’t the Blockchain Association’s fault. But the events of the last nine months, and the failure of lobbyists to enact meaningful change in D.C., might point to the need for a rethink and a fresh approach from crypto’s lobbyists.
Smith is confident that the SEC will lose its legal arguments intended to frame every digital asset, bar Bitcoin, as a security covered by existing securities law. But it’s likely to be a long slog. The anger felt widely at the collapse of FTX and a series of other high-profile crypto companies will take time to die down. Smith said “the legislative process is slow and that sometimes it takes a decade or more to move things forward.” Let’s hope that in another five years, we’re writing a different type of “take” on crypto’s regulatory standing. But, it might be good for crypto lobbyists to be humble about their “achievements” in the meantime.