Fighting between GOP crypto maxis and anti-crypto Dems fails to appreciate blockchain’s importance to the U.S.’ long-term economic interests.
After nearly a decade of gridlock, the United States may finally be on the cusp of crafting a cohesive policy framework for digital assets. In Congress, lawmakers are mulling a variety of proposed bills governing everything from stablecoins and securities rules to sanctions. The 2024 presidential race, meanwhile, may be the first to see crypto as a focal point.
While both sides of the aisle are playing valuable roles, Republicans especially influential congresspeople like Tom Emmer and Patrick McHenry have emerged as the industrys most important allies. However, the GOPs pro-crypto bias may also be its downfall. From uncritical crypto maximalism to Orwellian surveillance paranoia, Web3s industry bromides have crept into the partys campaign rhetoric and, worse, its policy proposals. In seminal upcoming legislative opportunities, such as the Houses draft crypto regulatory bill, Republican policymakers must focus on putting America first.
Memeified campaign rhetoric
During his presidential campaign announcement in May, Florida Governor Ron DeSantis insisted that the current regime, clearly, has it out for Bitcoin. The candidates populist red meat has been the Republican party line on crypto in this election cycle. So far, it has been difficult to differentiate the rhetoric of GOP presidential hopefuls from that of freedom-maximalist influencers on Crypto Twitter.
For candidates like DeSantis, protecting Americans from a federally controlled central bank digital currency surveillance state ranks high among blockchains potential use cases. Even GOP longshot Vivek Ramaswamy, a biotech entrepreneur who claims to understand this stuff in a much more deep and rich way than DeSantis, says he views Bitcoin as a decentralized alternative to the U.S. dollar and wants to make the 2024 election a referendum on fiat currency.
@GOPMajorityWhip Tom Emmer joined me in this critical fight to protect our markets: American investors and industry deserve clear and consistent oversight, not political gamesmanship. The SEC Stabilization Act will make common-sense changes to ensure that the SECs priorities
Warren Davidson (@WarrenDavidson) June 12, 2023
Meanwhile, at the other extreme, progressive Senator Elizabeth Warren and her anti-crypto army depict crypto as an omnipresent threat, simultaneously eroding investor protections, abetting money launderers and worsening Americas tax gap. What is lacking in this partisan hothouse is any informed appreciation of blockchains potential or its importance to Americas long-term economic interests.
Misguided policymaking
Among the rare exceptions are crypto-savvy GOP lawmakers such as Financial Services Committee Chair McHenry, who spearheaded the House Subcommittee on Digital Assets earlier this year. However, the influence of the crypto industrys memeified rhetoric is evident even in the partys innermost policy-making circles.
Take, for example, the Digital Assets Market Structure (DAMS) bill. The watershed draft legislation, penned in part by McHenrys committee, marks Congresss most credible proposed regulatory framework for crypto to date. While, as Messari CEO Ryan Selkis said, DAMS is a 10x improvement over past bills, it still falls short of bringing regulatory clarity to the industry.
Unfortunately, the proposed bill does more to regulate Web3 as crypto natives imagine it to be than as the industry operates today. In keeping with Republicans long-standing preference, DAMS conceives of crypto assets primarily as digital commodities to be overseen by the Commodities Futures Trading Commission. Indeed, the bill paves a clear path for CFTC compliance.
Theres one catch: To qualify as a digital commodity, according to DAMS, each network to which the digital asset relates [must be] certified to be [] decentralized, which requires that no single person has the unilateral authority, directly or indirectly, [] to materially alter the protocol or to prohibit any person [from] deploying software that uses or integrates with the blockchain network.
In other words, much of the more than 160-page draft bill only applies, with any certainty, to two digital assets: Bitcoin and Ether. Meanwhile, protocols with any level of centralized operations (read: most) remain under the jurisdiction of the Securities and Exchange Commission. Though an improvement on the status quo, the path to SEC compliance under DAMS is comparatively convoluted.
America-first crypto laws
The GOP may soon have a shot at defining Americas crypto policy. Now is not the time to succumb to partisan talking points or industry bromides. Lawmakers must clearly assess Web3 as it exists today so that the U.S. can unlock its benefits for decades to come.
As a first step, Republicans must bury the half-baked notion that crypto is antagonistic to the traditional financial system. They also must overcome their aversion to the SEC. In fact, Web3 and TradFi are deeply compatible, and Americas gold-standard security laws are a feature, not a bug. In the near term, policymakers should create clear SEC exemptions for digital assets so nascent U.S. protocols can get off the ground. Longer-term, officials should embrace blockchains enormous potential to enhance the United States regulated financial sector.
Most importantly, U.S. officials must recognize that extending dollar dominance to Web3 is a strategic imperative. Forget about blockchain as an alternative to the dollar; it is a potent tool for extending Americas economic reach. Republicans should lead the charge.
The Houses latest draft stablecoin bill is a good start and underscores McHenrys policy chops in Web3, but lawmakers can do more. That includes supporting Circle Internet Financial, the issuer of USDC. In the Senate, Republicans should emulate Roger Marshall by working with crypto-savvy Democrats, including Warren, to draft industry-friendly KYC and AML rules.
Crypto doesnt need to be a scam against the dollar. It can be a powerful strategic asset, but only if U.S. crypto policy truly puts America first.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or represent the views and opinions of either Umami Labs or Cointelegraph.
