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| Examining the intersection of cryptocurrency and government By Nikhilesh De Managing Editor, Global Policy & Regulation December 14, 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.
That was a substantive, lengthy congressional hearing on digital assets last week. What did we actually learn though?
—Nik
'Watershed' hearing FTX CEO SBF was one of the witnesses at last week's House Financial Services Committee hearing. (Stefani Reynolds/Bloomberg via Getty Images) The narrative The U.S. House Financial Services Committee held a wide-ranging hearing on cryptocurrencies last week, focusing on issues from financial inclusion to regulation to backing to technical structure. Why it matters This newsletter is premised on the idea that regulations will matter to crypto, and last week’s hearing suggests lawmakers are getting closer to a place where they’ll introduce something. We won’t see the results of the hearing until next year. However, if the hearing was anything to go by, these regulations may be fairly encompassing of the actual reality of cryptocurrencies rather than focused on the bogeyman they’ve often been made out to be. Breaking it down Last week’s Financial Services Committee hearing was something else. It felt extremely substantive, to the point where lawmakers were even asking basic questions (“define stablecoins”) but in a way that felt as if they really wanted to get at the root of the subject rather than out of ignorance or because they hadn’t done their homework.
Industry participants seem to agree: Many called the hearing a “watershed” moment for crypto regulation in the U.S.
You can read my recap on my live-blog here or my preview here, but let’s talk about what didn’t come up during this hearing.
Diem: There were a small handful of questions about Meta’s (formerly Facebook) involvement in the stablecoin project known as Diem (formerly Libra) and its pilot project with the digital wallet subsidiary Novi (formerly Calibra). That being said, these were a small minority, and focused on the aforementioned Novi pilot as well as Paxos’ involvement in the project. This is probably a sign of that maturation in terms of how crypto is discussed among lawmakers – it would have been easy to paint Diem as the figurehead for all of crypto, or at least all of stablecoins, but this didn’t happen.
That being said, Libra Diem is still acting as a figurehead for much of the stablecoin regulation conversation, as seen in reports by the Bank for International Settlements or even the President’s Working Group on Financial Markets.
China: I don’t think there were any questions about the digital yuan, which is almost a surprise considering it has hovered over much of the central bank digital currency conversation over the past year.
But, as many have pointed out, China’s work on a digital yuan is different from what people are proposing for a U.S. digital dollar.
Mining: I discussed this subject with CoinDesk Chief Content Officer Michael Casey and World Economic Forum Deputy Global Head Sheila Warren on their “Money Reimagined” podcast. There really were not a lot of mining-specific questions – despite the fact that Brian Brooks, the former acting Comptroller of the Currency, currently heads Bitfury, a bitcoin mining firm.
To be clear, mining did come up. Rep. Rashida Tlaib (D-Mich.) asked about the environmental concerns around proof-of-work mining and options for lessening this impact – very real concerns, for what it’s worth – but her questions weren’t directed at Brooks, and the topic was otherwise conspicuously absent.
We do know there is legislation coming: Rep. Josh Gottheimer (D-N.J.) already said he’s working on something based on the President’s Working Group report, while Rep. Warren Davidson (R-Ohio) has repeatedly introduced his Token Taxonomy Act. What remains to be seen is whether any proposal secures a critical mass of support to actually go anywhere.
We get to repeat the whole thing today: The Senate Banking Committee is holding a hearing on stablecoins, though this promises to be a shorter and more tailored event.
Dante Disparte of Circle, Jai Massari of Davis Polk & Wardwell, Alexis Goldstein of the Open Markets Institute and Professor Hilary Allen of American University will discuss the topic.
A message from KuCoin KuCoin is a crypto exchange built for all classes of investors. Known as the home of altcoins, it offers more than 400 tradable coins in trending sectors like DeFi, NFT and Metaverse.
The Biden Bunch Changing of the guard Key: (nom.) = nominee, (rum.) = rumored, (act.) = acting, (inc.) = incumbent (no replacement anticipated) OCC nominee Saule Omarova has withdrawn her name from consideration for the role. Omarova faced an uphill battle after five Democrat senators reportedly told the White House they would not support her nomination. At least two senators – Jon Tester (D-Mont.) and Mark Warner (D-Va.) – said so during her confirmation hearing last month.
Elsewhere Chatex Users Ask US Treasury to Release Crypto Frozen by Sanctions: Users of the Chatex cryptocurrency exchange found they could not access their funds after the U.S. Treasury Department’s Office of Foreign Asset Control sanctioned the trading platform on allegations it supported Suex, another sanctioned platform allegedly involved in facilitating ransomware payments. The Infuriating Patchwork of Crypto Regulations Is Good for Crypto: This opinion contribution by Matthew Homer, an executive in residence at Nyca Partners and a former executive at the New York Department of Financial Services, argues that the current regulatory structure around digital assets in the U.S. is better for the sector than consolidating regulatory authority under a single entity would be.
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Consensus 2022 Introducing CoinDesk's Culture and Entertainment Week. 2021 was the year crypto became a mainstream cultural phenomenon as much as an interesting experiment in money. This week, we explore crypto’s widening effect on media and entertainment, and how it’s creating culture itself. Explore Culture Week here.
Beyond CoinDesk (The New York Times) Climate change is a thing. The New York Times has an interesting new interactive project highlighting what it looks like on a very real level from 193 different countries.
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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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