A Look Back at the State of Crypto Regulation in 2023

The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. It was a wild year for the state of crypto regulation ripple when a partial victory against the SEC. Tr five giants like Blackrock entered the spot. Bitcoin ETF Race and FTX founder Sam Bateman freed was found guilty of fraud. Joining us now to reflect on everything that happened this year is Blockchain Association Director of Government Relations, Ron Hammond Ron, welcome to the show. I hope you're having a happy holidays. Likewise, Jen, thanks again for having me. Of course. Now, as you reflect back on 2023 what do you think the most pivotal action or pivotal moment was for crypto this year when it comes to regulation? Definitely, uh I would probably say the Binance case honestly, I mean, it was, we knew the FTX uh drama was going to play out all the 2023. Uh We thought that probably the trial will be actually more the highlight of the year, but Binance was always that kind of uh last shoe to drop. Uh There was a lot of folks in DC who have been talking for quite some time uh about the concerns with Binance. Uh the fact that they were offshore, the fact they mimic very much similar actions of FTX, uh the potential chance that they're involved in money laundering and sanction invasion. And I think we've kind of seen that all come to head here in DC with the recent DOJ and other agency enforcement actions uh on B and CZ himself. Uh and it kind of seems at least here in DC that a lot of the bad actors at this space uh was having is starting to clear out. Uh And we're starting to see that in Congress as well. Uh We're seeing a lot of folks saying, OK, we've got rid of all the scamming folks, we've learned our lessons. Uh Let's move forward legislation because it looks like the regular isn't coming any time soon, especially from the SEC. So, uh there's an impetus for Congress to move. Uh But at the same time, uh there's a lot of folks saying, well, kind of similar to FTX May is buying saying it should have been a pause in the industry as a whole. Uh But I think especially recently and especially the potential bull run that's happening. Uh Right now, uh that there is that notion that crypto is here to stay and I think that uh regulation is needed and DC is finally waking up now, if we broaden the conversation out a little bit, look a little bit outside of DC after this most recent uh Binance settlement, I know we're waiting for czs sentencing that's happening early next year. Where do you think Binance goes from here? Of course, they need to leave the United States. That's part of the deal they made with the DOJ. But what happens to Binance from here? And what happens to CZ from here? Might he still be influential in the industry in some way, shape or form? I mean, he still holds a lot of power in the industry. I know there's a lot of folks uh who respect him and look up to him in the industry itself. I will say at least in the DC side, uh almost a year ago, actually, almost a year ago from the state. Uh SPF joked that CZ could not come to the United States, he could not come to DC and lobby like uh SPF was on the hill. Uh There was some merit to that. Um And it seems that at least for the Binance going forward, the question remains, are they still going to be a viable place in the industry? Um You know, at least when it comes to international uh regulations and they have certain obligations they need to uh combine by, uh but at the same time, we're also seeing the United States put their own uh folks in with the conservatory of sorts to watch over all the actions for Binance for the next 5 to 6 years. Um And so it seems like at least the United States realizes that Binance plays a huge role uh both within the crypto industry, but also more on the illicit finance side. Um But show them down completely, could upend the industry as a whole. And so I think that we're seeing at least a more measured approach from the DOJ on this. Um but time will tell, you know, there's still a lot of questions recently, more about tether. Um, and it's more, uh, in regards to their money laundering concerns or know your customer concerns, it seems that that shorted up, uh, a lot more recently. Uh, but we'll see as time goes on if the doj does get involved, uh, with tether, that's another big thing to watch. Uh And finally, I will say too that, you know, at least for the American exchanges, we're seeing a lot of folks getting sued by the SEC here so to be exchanged in crypto, uh, it's a pretty tough time and if you're not even doing the bad actor, things like sanction invasion and money laundering that the offshore changes are doing, uh, here at home United States, you're getting sued by the SEC for, uh, potentially less in securities even though it's unclear which ones are securities and which ones aren't. So, you know, it, it seems the industry is getting hit from all sides here. Uh, but at the same time, there's recognition at least within, especially Congress, uh, that something needs to be done legislatively because the status quo is just not working. Uh, and the industry needs to have a foothold in the United States. If we're going to become even a player in the space, it's the idea of being a leader at this stage. Unfortunately, it seems a little out of grass at the moment. You know, you brought up tether, um, curious to get your opinion here. If we do see an enforcement action against tether next year, what might that look like? What agencies could we see, look into tether? Um, and I guess what might that look like from a United States perspective? Of course, we know Tether, um, is the stable coin of choice in many areas around the world that are not the United States. Talk to me about what might happen through us lens. Of course. So, um, the concern Tether actually date back to the terror days. Um, so when terror imploded, there was a lot of concern from DC on the audits and the reserves that are backing Stablecoins. Um, things like Algo stablecoins were something that a lot of folks in DC on both sides of the aisle were not, uh, very keen on. Um, and there was legislation that moved through the House Financial Services Committee in July which put a moratorium on those things. Uh There was also concerns, uh, more recently though about the, uh, terrors of financing angle. Uh and the lack of uh know your customer KYC that's happening both of the exchanges, but also at tether itself. Uh And so I think we're seeing a little bit more of showing up from uh the tether side. Uh at least from the perception in DC from what I'm talking to folks. Um But still at the end of the day, I think the main thing to worry about is Treasury. Um We had Wally Aamo who's the Deputy Secretary of Treasury, uh come to our conference about two weeks ago and he made a full announcement, uh asking Congress for more uh authority, especially when it comes to secondary sanctions in the Bank Sec Secrecy Act. But the last thing he said was uh major concerns about uh stablecoin issuers being offshore and using us dollars as a reserve. Uh And they kept reiterating, there's a lot of concerns about that. We need you here on shore. He didn't explicitly say tether, but it seemed like everyone in the room was pretty much reading the tea las. This is targeted at te. Um So we'll see exactly what the next moves are for. Um Te moving forward. Uh Do they establish more of a presence in the United States? Um They're not too active here on Capitol Hill. Uh at least in my knowledge, I know they have some folks hired. Um but they're more on the consulting side, not in house. So, um we'll see what the future holds. Um, but at least at the same time, you know, US DC and other stablecoins, while they might be in a better position right now, the United States, uh, if we don't get Stablecoin legislation done in 2024 we could be in the same predicament we are, uh, currently sitting right now at the end of 2023. Well, that Stablecoin legislation, it really feels like it was. It's been a start and stop mission throughout all of 2023. Um Of course, we know Patrick mchenry was one of the big voices behind that. Um And he has decided to step away from his role in the government. So how do you see legislation, especially crypto focused legislation uh unfolding over 2024? Yeah. So I think it's important also to start with the timeline here. So let's recall. Congress started at the beginning of January 2023. Uh There was a huge uh delay because they couldn't find who the speaker would be. So that added some time to figuring out um you know who the speaker is before. We can even have committee action. We have a record number of hearings that come through the House Financial Services in the House AG committee, a stable coin bill and a market structure bill gets to a vote in July. Uh And it has a decent amount of Democrat support and unanimous uh Republican support in both those committees. Um So we got a pretty good, strong set to, um, you know, move this legislation forward for a house floor vote in fall. And that's when the speaker drama continues again with also a shutdown happening right before that or a threat of a shutdown. Uh And we've just seen delay after delay, after delay. And again, it's not because of crypto, it's because of the politics. It's not just the crypto bills not getting votes on. It's several of the bills including the government, getting funding that are getting kicked down the road. Um And so when we look at 2024 this stuff happens all the time. It's an election year, a lot of folks really want to get their talking points in and show why their party is better than the party in power or vice versa. Um And a lot of things in politics really get upended in an election year. So what we're gonna see is a coming into January, they got from the government. Again, they're gonna do a half the other government in February. Um They're doing that with a one vote Republican majority. Uh look likely uh in that time. And already we've seen the Republicans in the house have a hard time getting their own act together to elect their own speaker. So if they're able to thread that needle from the government, then we go to crypto legislation. So a lot can really happen. And the next move will be the Senate and that's equally as long. So, uh, it's gonna be a really tough slog and I think, you know, Stablecoins is still looking like the best option right now market structure is having a hard time getting some traction in the Senate. Um, but we're gonna keep pushing, we'll see what happens. Um, but right now it's, uh, it's gonna be a really tough slog to get anything done 2024 just with all the whole slew of things going on in politics generally. Sounds like it's going to be a long road ahead, not only for this industry but many and, and the country ahead of the elections in 2024. Before we go, we got to bring up sec chair, Gary Gensler, he of course made coin desks most influential list for his impact on the industry this year. Uh How do you anticipate he will continue to lead the SEC in 2024. Do you think we're going to see more regulation by enforcement? I think. So, it seems like at this point, there's really no appetite to actually put some rules of the road on the book. Uh And again, they've been going to the courts for a lot of these uh enforcement actions and they've been losing a lot recently. Um And again, it's just on the crypto front here, but let's also not forget GG is doing a lot of soul on private equity. Uh on bank capital standards and a few other folks, uh uh especially more on the accounting side as well. So he's making a lot of enemies. Uh We had a lot of democrats uh even go against Gary against on a number of other priorities. Um And so he's losing a lot of friends left and right. Uh And again, the right was never going to be a fan of him to begin with, but the left, we're starting to see folks appeal for various reasons, crypto being one of them. Uh So the question is, how far can Gary against, keep pushing the SEC, keep getting pushed back in the courts and decide uh to trek forward with the status quo. Uh And we're starting to see a lot of the segment say it doesn't seem like it's working uh especially with all the actions of the FTX and Tara and a lot of other things the SEC has missed. Uh There's a lot of folks saying, do they have the credence here? And we're starting to see that happening a lot, especially with the senior Democrats who are now taking more the line of, I don't think actually his view that there is no need for legislation is actually holding any water whatsoever, let alone the courts. Uh And so we'll see if that's an impetus to move forward uh with legislation and to join the Republicans in that effort. But the last thing I will highlight it is an election year. Uh, it's really rare to buck your own party, especially when you're trying to, you know, keep the White House or keep a hold in the Senate. So, uh, we'll see if that actually percolates, but if anything does happen on the legislative side or at least on the regulatory side, I expect more of it to happen in the first part of the year. Uh, because the second part of the year, the election, a lot of folks tend to um go to more of the high level stuff uh and try to get their talking points and, and it's hard to see and enforce action at that time. So we'll see. And Ron, on that note, does the Blockchain Association have any plans for any further legal action? Um We'll see, I mean, there's a lot of things that are pretty egregious. I mean, I look at S A 121 SC and B and 121 which is a major reason why folks like Bny Mellon who even when I was a Hill staffer were lobbying for, for years back in 2017 to offer cussing services for crypto. And it's the thing that's over six years since I was in having those conversations as a hill staffer that, that still hasn't percolated yet. Uh And again, it's because of stuff like s a 121. So I look at that, I look at the treasury broker rule that has a massive implications that not only capture crypto but also payment providers. So that's another major thing. Uh And then finally look at the CFP B. Uh that's an agency that crypto is not too familiar with, but we start to see them dip their toes a little bit into the crypto space more on the wallet side. Um And so I think we're going to see both in taxes. So post to wallets, uh securities law for all these other uh various forces action at the sec uh really causing some drama going forward. So expect some more legal fights um whether it be from the Blockchain Association or some of our member companies. Um because it's gonna probably be where most of the uh decisive factors are uh in terms of at least some form of clarity if Congresses get their act together. All right, Ron, we're gonna have to leave it there. Thanks so much for joining and providing that insight and we hope you have a Happy New Year. I hope you have a Happy New Year as well. Thanks Jan. That was Blockchain Association, Director of Government Relations. Ron Hammond.