The Biden Administration has sought to undermine the digital asset industry. Leading the anti-crypto charge has been Gary Gensler, the Chairman of the Securities and Exchange Commission. As President Joe Biden has recently exited the Presidential campaign, this may lead to a change in policy posture for the current Democrat presidential candidate, Kamala Harris.
Meanwhile, former President Donald Trump has been very supportive of crypto innovation, including it in his re-election platform. As was recently reported, the GOP platform states:
Republicans will “end Democrats’ unlawful and unAmerican Crypto crackdown and oppose the creation of a Central Bank Digital Currency [CBDC]. We will defend the right to mine Bitcoin, and ensure every American has the right to self-custody of their Digital Assets, and transact free from Government Surveillance and Control.”
Recently, CI connected with tZERO executive Alan Konevsky, Vice President and Chief legal officer for the firm, to hear his perspective on digital asset policy and his opinion as to the current Administration’s hostility towards digital assets. Our conversation is shared below.
The Biden Administration has been fairly hostile toward digital assets, and this seems to have increased post-FTX. Do you think this is a mistake on their part?
“It has been somewhat unexpected to see blockchain/digital assets play that much of a role in the ’24 national election as it has – I don’t think anyone would have anticipated that. Part of the reason revolves around the fierce competition for votes and campaign cash in an expected tight national and down-ticket races, the weight and lobbying effort the digital asset industry has deployed, and the realization of the significance of digital asset regulation and other topics to an increasing segment of the population, including the ~50% of the electorate comprised of millennials and Gen Z voters,” said Konevsky.
President Biden’s policy has been, at best, skeptical of cryptocurrencies and digital assets/blockchain, starting from the Executive Order in 2022, and support for leading anti-crypto voices in Congress (especially Senator Elizabeth Warren) — incidentally, why does crypto need to be a partisan issue (some Democrats historically were focused on the financial inclusion and other benefits of digital assets such as Representative Torres.
Also, decentralization [DeFi] helps to address too big to-fail risks Senator Warren and others are concerned about with respect to our financial system — and a significant part of it has been focused on regulation by enforcement.”
Konevsky said that former President Trump has not always been a crypto supporter, but he has recently expressed his strong support for the industry, including crypto mining, expressing his opinion that the US should be a leader in the space. Trump sees the repeal of SAB 121 as “low-hanging fruit” benefitting the crypto industry.
“This would dovetail with the position taken by Congressional Republicans – including in recent legislative initiatives such as the FIT21 bill and increased oversight of the SEC and its Chair.
Depending on the results of the elections, more crypto-friendly bills might become law in that environment — though near-term impact might be changes in agency leadership — also keep an eye out on judicial appointments, especially as courts play a bigger role in the post-Chevron world — and whatever the president thinks can be achieved through executive action. Even the Biden/Democratic administration has arguably softened some of the rhetoric in view of these election pressures and priorities — or at least some commentators have sought to ascribe regulatory changes such as ETH ETF, as well as some level of bipartisan support for the FIT21 bill and SAB 121 repeal to that.”
Konevsky noted that the Republican National Committee has adopted a fundamentally pro-crypto platform as digital assets were included in the portion of the platform on emerging industries – this is a first in national US politics.
“If it informs the legislative and regulatory agenda for the next four years, it may mean a meaningful shift towards positive, proactive regulation, one that takes into account the function of digital assets in particular use case and tailors regulation based on that. The statement also takes a negative stance on CBDCs,” said Konevsky.
Konevsky added that election priorities do not always make it into action, and the actual legislative and rulemaking process is way more complex than that.
“But it is important as an unprecedented step that recognizes the growing digital assets environment and its significance to the national dialogue on striking the right balance between appropriate regulation and innovation, as well as on inclusion and financial sovereignty. In the long run, the reading of tea leaves on who will win may not matter much as digital assets and related topics around regulation enter the mainstream – with emerging level of bipartisanship showing that path.
Technology does not need to be politicized.”
Konevsky expressed his opinion that a positive, proactive, functional set of rules that examines this technology’s promise and regulates it based on the various use cases across the economy is needed. This has not been helped by the Gensler leadership at the SEC.
Konevsky said that HR 2799 – passed the House and is now in the Senate – is a credible and sustainable alternative to the public markets for businesses and projects that are not ready for an IPO – including from the providing functional secondary liquidity pathways for private assets, a challenge TZERO has been successfully tackling for the last six years.
As for CBDCs, Konevsky described this concept as an interesting “paradox.”
On the one hand, there is the revolutionary prospect of creating an entirely new public infrastructure that would make digitally native money open, accessible, inclusive, and free. That would probably be the first time since the advent of paper currency and coinage centuries and millennia ago that such public infrastructure is made available. The open, transparent, and programmable smart contract automation that would ride the public digital ledger would open up new doors to functionalities for use and transmission. Digitization may also make the currency easier to use for instant cross-border settlement/money movement – which would impact the role of the currency for international trade and reserves – the role that the US dollar has played in the recent past. It’s those features, however – the transparency at the micro, retail level, as well as programmability – that also raise critical questions regarding social and legal issues such as privacy and government control at the micro level of our society.
He said that CBDCs require a broader conversation about values and priorities. What works for some societies, like China, may not work in the US.
“That does not mean CBDC would not have a future here, but how they are designed – including wholesale vs retail, with banks and other intermediaries continuing to play a role – as well as vs private solutions such as stablecoins and fast banking rails such as FedNow – will be a major topic,” he stated.
Asked if the US is falling behind when looking at MiCA legislation in Europe and the ongoing consultation on digital securities, Konevsky said that for all of the parochial and protectionist features designed to favor Euro-denominated stablecoins, MiCA lays an important marker in the global race towards clear, proactive and reasonably comprehensive regulatory roadmap for digital assets.
“…if the US is to keep up and remain the marketplace of choice for innovation and emerging technologies, as well as to safeguard the place of the US dollar and dollar-denominated assets as the global reserve currencies, medium of exchange and capital allocation of choice, it must adopt comprehensive reform that embeds digital assets into the financial services and real economy in a credible, predictable and positive way,” Konevsky declared.