Last week, the Council of Economic Advisers (CEA) released its annual report, dedicating an entire chapter to digital assets. However, the CEA argued that the crypto industry’s aim to exist outside of government regulation sets it up for failure. In particular, the report warned that “proponents have been relearning the lessons from previous financial crises the hard way.” Many in the industry found this assessment troubling, given the current regulatory climate.
A report from Galaxy noted that “the authors of the CEA report repeatedly cite crypto’s most sordid bad actors as broadly indicative of the industry”, referencing BitConnect, an infamous 2017 scam that was only charged by the SEC in 2021. This, the report argues, is a flawed method of assessment.
Others argued that the report’s attitude towards crypto would only encourage companies to move their operations offshore, depriving the US of innovation and exposing investors to riskier business practices. “Foreign countries are becoming more accommodating towards the crypto industry, while some in government seem to grow ever more suspicious of its potential,” said Kristin Smith, CEO of the Blockchain Association. “Crypto is here to stay, and it could offer a more secure financial system and an internet that puts users first.”
At a recent appearance before Florida International University law students, SEC Commissioner Hester Peirce acknowledged there are US regulators trying to push crypto away. “Some in the regulatory world are fine with crypto innovation leaving the United States,” she said. “I have a different opinion.”
The CEA report quotes prominent computer scientists who express their concerns about crypto, but critics argue the authors fail to note the thousands of prominent computer scientists that believe blockchain technology is transformational. Leading universities like MIT, Stanford, UC Berkeley, and University College London are conducting research on blockchain and crypto assets, while many cryptographers and computer scientists advocate for and develop blockchain technology.
This past week saw a host of unexpected regulatory actions taken against cryptocurrency entities. Do Kwon, the founder of collapsed Terraform Labs, was arrested and indicted, Coinbase received a Wells notice from the SEC, and SushiSwap was targeted by the same agency with new securities violations. Commissioner Peirce warned that under Chair Gary Gensler’s ambitious agenda, the crypto industry should prepare for more enforcement measures.
