'Opportunism and Demagoguery' Fuel the U.S. Regulatory Crackdown, Steptoe Partner Says

Steptoe partner Jason Weinstein, on the stage at Consensus 2023, said this latest wave of crackdowns on the crypto industry is the worst he has ever seen.

AccessTimeIconApr 28, 2023 at 9:30 p.m. UTC
Updated May 1, 2023 at 1:52 p.m. UTC
Drive the Crypto Policy Conversation Forward
October 24, 2023 • Convene • Washington D.C.Where the industry establishes the digital economy’s legal, regulatory and compliance best practices for the future.Register Now

AUSTIN, Texas —“Political opportunism and demagoguery” are the largest drivers of the regulatory crackdown and federal banking restrictions on U.S.-based cryptocurrency companies,” Jason Weinstein, a partner at Steptoe, said during a panel at Consensus 2023.

U.S. regulators such as the Securities and Exchange Commission and Commodity Futures Trading Commission have always engaged in an “arms race” to rein in the cryptocurrency industry. However, the multi-billion dollar collapse of crypto exchange FTX has triggered a particularly “tough” wave of crypto regulatory crackdowns, including those on prominent crypto exchanges including Kraken and Coinbase, Weinstein said.

“I was at the Department of Justice [DOJ] for 15 years, and I’ve never seen a circumstance in which agencies tripped over themselves so aggressively to show how tough they can be on a lawful industry,” said Weinstein.

Recent attempts to strong-arm crypto have also affected a large swath of the industry, including both centralized cryptocurrency exchanges and decentralized finance (DeFi) protocols. The severity with which regulators have attacked the industry, he said, has much to do with the embarrassment the collapse of FTX caused politicians and less to do with the broader cryptocurrency industry’s activities.

“The FTX case made the [regulatory environment] worse, but the FTX case is not about crypto,” said Weinstein. “It’s about good, old-fashioned fraud and self-dealing – the same kind of s**t we saw in Enron.”

It’s an environment that has caused both startups and more mature companies to seek a life raft to “get the hell out of the United States,” according to Weinstein.

“Startups and mature companies are asking how they can locate outside the United States to try to avoid U.S. jurisdiction, not because they're trying to do something wrong but because the U.S. makes it hard to innovate and build even when you're trying to do it,” Weinstein said.

Rebecca Rettig, chief policy officer at Polygon, warned the tougher regulatory environment could fuel a mass exodus of crypto companies from the U.S.. However, the U.S.' loss will hopefully be another country’s gain, she said.

“This is a global and borderless industry,” said Rettig. “People think this is a real opportunity overseas to bring the next stage of the internet, both financial and technological, into their country. This is good for their economies.”

Edited by Henry Bond and Jeanhee Kim.


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

Elizabeth Napolitano

Elizabeth Napolitano is a news reporter at CoinDesk.

Learn more about Consensus 2024, CoinDesk’s longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.