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| Examining the intersection of cryptocurrency and government By Nikhilesh De Managing Editor, Global Policy & Regulation December 7, 2021 If you were forwarded this newsletter and would like to receive it, sign up here. Sponsored by
Hey folks,
Welcome to State of Crypto, a CoinDesk newsletter looking at the intersection of cryptocurrency and government. I’m your host, Nikhilesh De. You’re probably here because you signed up, but in case you’re not a fan, you can unsubscribe here.
Senator Cynthia Lummis of Wyoming revealed she bought bitcoin when prices hovered just above $300. Eight years and two bull markets later, the lawmaker is still a firm believer in the asset class. She spoke to CoinDesk about her goals for 2022 as part of this year’s Most Influential series.
—Nik
Meet Senator Lummis Art from an NFT that will accompany Sen. Cynthia Lummis' Most Influential profile. Proceeds from the sale of the NFT will go to charity. (Gisel X Florez/CoinDesk) The narrative This past January, U.S. Senator Cynthia Lummis (R-Wyo.) was sworn into office, where she’s been a prominent advocate for bitcoin. CoinDesk has named Lummis to its annual Most Influential list for 2021, recognizing her efforts to champion digital currency issues in the U.S. Congress. I spoke to her for this profile. The full video will air when the profile publishes later this week, but here’s a preview. This interview has been edited for concision. The full interview can be found in Senator Cynthia Lummis’ Most Influential 2021 profile.
Looking ahead, I'm curious: What are some of the goals you have for 2022? Anything concrete in terms of legislation you'd like to introduce or laws you think might be able to get through the Senate, the House and the President?
Well, the challenges still exist to educate members of Congress about digital assets. But the need for some statutory frameworks is growing stronger every day, because the advancements in the technology is outstripping the Congress's ability to really understand and embrace this subject.
So we are working, we being Senator Kyrsten Sinema of Arizona and I, as the co-founders of the Financial Innovation Caucus, are working with other members on a comprehensive bill that we will be rolling out. We anticipate that you will see it before the end of this calendar year in total, because we want to put it out as one big draft file it so we can start getting input and feedback from people in the industry, the regulated community as well as the regulatory community.
And we then will probably in 2022, break the bill up into five or six rational pieces that can stand alone and then move it forward with different bipartisan co-sponsorship, with the goal of engaging many more members of the U.S. Senate in this topic. And there are a number of senators who are interested in certain components of the bill, say, the banking component or the consumer protection component, the anti-crime component.
The definitions are very important because they will help determine which regulatory agency will be the primary driver of a certain stucked subject such as the SEC or the Commodity Futures Trading Commission. So, it's a very comprehensive bill. We're meeting daily with other members to try to take them through it in a broad brush. And for those who want to take a deeper dive, we're able to do that, but you will see a major piece of legislation in the next days and weeks.
In terms of what you've seen over the past year, what's your impression of the kind of level of education that we're seeing in terms of how lawmakers understand crypto, and what do you want to see? Or what do you think might be able to happen over the next year or so in terms of this education?
Well, we saw the President’s Working Group report, some of which we've incorporated into this piece of legislation – in fact, most of it with regard to stablecoins. And we will continue to educate – as a caucus, we are meeting regularly and bringing in speakers to educate people about a variety of topics. These are occurring mostly at the staff level, but there are some discussions also among senators, and then we're going to start a series of dinners in January, where we can just have both bipartisan and in some cases, if people want to have more partisan discussions, we can. But the delight of this topic is it's very, very bipartisan or nonpartisan.
And so we want to make sure people understand this asset class, and how it's important now to begin to incorporate this asset class into people's ability to have them in their 401(k) or other retirement savings accounts, and begin to integrate certain components of the digital asset space into people's everyday investment strategies.
The other thing that we're finding, and it's something that I've wrestled with, Nik, and I'm trying to get better at, is to just explain the basics of this to people. For example, when I'm asked, “Well, tell me about this, what is bitcoin? And how does this work?” I tend to want to go to the mechanics of it and try to explain the blockchain and how bitcoin is mined, and about the private keys and so forth. And I suspect that I'm getting too far into the weeds. Mostly people want to know, they're used to dealing with either cash or now credit cards. In fact, some people rarely even use cash anymore. So this is just kind of the next step from a credit card.
A credit card is essentially the first iteration of digital money. But now this is taking the concept of digital money beyond fiat currency beyond the U.S. dollar and into other stores of value. So it's very much the next step. And I probably need to retool my own thinking about how to engage with people on this subject. We didn't need to teach people what was going on behind the scenes in credit cards, we just needed to show them you stick it in a device that you swipe or you tap and then you get a bill that itemizes your purchases and you can pay it all in one bill. That's the simple concept behind a credit card.
We need to think of ways that are just as simple to describe the use of cryptocurrencies or digital assets, and the advantage that this is one of the most amazing asset classes because the users, and the people who were the early adopters and embraced it early, are the unbanked and the underbanked people, because this allows them to transact [with] business without bank fees, Western Union fees and other ways of transferring money that they've had to endure if they were underbanked or unbanked.
So, now we're trying to share what the underserved community already knows, and try to share it and integrate it with the community that's more accustomed to traditional banking, and we are making progress. But I think we saw during the debate about the definition of “broker” during the infrastructure bill last summer that there's still a lot of misunderstanding within government, about these assets, how they work, who has what information. And so we've still got a long way to go, Nik.
I'll tell you though, I can't speak highly enough of the digital asset industry. During that whole debate, they really came forward, they engaged with their U.S. senators, and they were able to help inform them, and also inform them how significant the digital asset community is. And that awareness alone has caused a lot of senators to take the time to learn and engage in this new asset class. So there's a silver lining behind that, Nik, as the language that is not good as to the definition of broker did become law.
But we'll be able to get it corrected subsequently, a correction is certainly in this comprehensive bill that Senator Sinema and I have. But the manner in which the digital asset community engaged with the U.S. Senate was truly impressive and remarkable, and they're keeping it up. And that just aids the efforts so much more, when people know their constituents care about this.
What role do you see yourself playing particularly, besides drafting the bill?
Nik, it's all of the above. I did do a floor speech on stablecoins earlier this year. I anticipate that I'll be doing more topical floor speeches during 2022. I think that's going to be necessary as part of the rollout of this very significant piece of legislation. We still hear people talking about cryptocurrency as primarily a criminal enterprise, which is –nothing could be further from the truth. The FBI will come in and tell us that they'd much rather have people commit crimes with bitcoin, for example, than with U.S. dollars, because they can be retrieved and traced. There are still those 10-year-old stigmas associated with digital assets.
We still have a lot of work to do, just simply dispelling some of the falsehoods about digital assets, and then help people understand how significantly they can integrate into not only the asset classes of people who are able to save, but how important they are to people who are unbanked and underserved. I think that the utility for that community has been underestimated and underreported. And we want to correct that in 2022.
CoinDesk’s Most Influential 2021 is out now. Find all the names here.
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The Biden Bunch Changing of the guard Key: (nom.) = nominee, (rum.) = rumored, (act.) = acting, (inc.) = incumbent (no replacement anticipated) I don’t see any confirmation votes scheduled right now, so let’s instead talk about Wednesday’s hearing with Circle CEO Jeremy Allaire, FTX CEO Sam Bankman-Fried, Bitfury CEO Brian Brooks, Paxos CEO Charles Cascarilla, Coinbase Inc. CEO (and Coinbase Global CFO) Alesia Haas and Stellar Development Foundation CEO Denelle Dixon.
A hearing memo suggests this hearing may be focused on what a regulatory framework for digital assets might look like, citing issues like stablecoins and comments such as those from SEC Chair Gary Gensler. I plan to live-tweet this (@nikhileshde) and CoinDesk will stream the hearing.
What I’ll be listening for: Hints as to what’s to come in 2022. This year is effectively over, and Congress’s focus will be on the National Defense Authorization Act and President Joe Biden’s Build Back Better Bill. This means that tomorrow’s hearing will really be a preview of what the Committee might do next year. I’m specifically curious about any proposed legislation and how seriously the committee leadership considers it; which lawmakers ask questions; and whether there is a particular focus on stablecoins or if the questions address crypto more broadly.
Elsewhere Craig Wright Found Not Liable for Breach of Kleiman Business Partnership: Craig Wright will have to pay W&K Info Defense Research, a joint business he started with Dave Kleiman, $100 million but otherwise will not owe any penalties or damages after a jury ruled mostly in his favor and against Ira Kleiman, who sued him on allegations that Wright and Dave Kleiman were collectively bitcoin’s pseudonymous creator, Satoshi Nakamoto (the jury did not make a determination as to whether they viewed this position as accurate). DeFi’s Decentralization Is an Illusion: BIS Quarterly Review: The Bank for International Settlements is calling nonsense on claims that decentralized finance (DeFi) projects are actually decentralized. In a new report, the central bank for central banks says policymakers should regulate centralized parties in DeFi projects. OCC Highlights Digital Assets in Risk Report for Banks: Flagging mostly that the OCC put an entire section on digital assets into its semiannual risk review, published yesterday.
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Consensus 2022 Consensus 2022, the must-attend crypto and blockchain experience of the year, is heading to Austin, Texas, from June 9-12, 2022. This is the only festival showcasing and celebrating all sides of the blockchain and crypto ecosystems, and their wide-reaching effect on commerce, culture and communities. Register now for the lowest price.
Beyond CoinDesk (Reuters) Treasury Secretary Janet Yellen doesn’t yet have an opinion on whether the U.S. should launch a digital dollar, she told Reuters during a conference. She did say Congress would have to be a part of this decision. (The Washington Post) The Post took a look at how traditionally underserved communities are participating in the cryptocurrency sector. This is a very even-handed piece. (Axios) The U.S. government is taking a look at privacy issues and the harmful ways data collected online could be used. It’s too early to say where this will go, but it’s an interesting move.
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If you’ve got thoughts or questions on what I should discuss next week, or any other feedback you’d like to share, feel free to email me or find me on Twitter.
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See y’all next week!
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