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We find ourselves in a strange interregnum for crypto policy in the United States.
On one side, Securities and Exchange Commission Chair Gary Gensler is ramping up an all-out war against the crypto industry, accelerating enforcement actions and saber-rattling, perhaps in anticipation of being replaced after November’s elections. The aim seems straightforward: Let’s do as much damage to crypto while we have the chance.
On the other side, a growing bipartisan group in Congress is working, ploddingly, towards new crypto-focused legislation in an acknowledgment that the current status quo is untenable.
The slow and steady legislative pace gives Chair Gensler the chance to be the fox in the crypto henhouse while our lawmakers are occupied with other jobs on the farm.
The insatiable campaign against crypto undermines the work that Congress has done so far to address crypto’s long-standing regulatory quagmire. It’s time the farmers regain control and flush the fox out.
Indeed, Congress has made notable progress towards addressing key regulatory issues, even if their efforts remain imperfect and incomplete. Some of the pieces of draft legislation could prove a net positive for the crypto ecosystem with considered revisions. Rep. Patrick McHenry and Rep. Maxine Waters’ yet-to-be-released stablecoin bill has garnered decent bipartisan support and could reach a House floor vote this session. McHenry’s FIT21 bill on crypto market structure is headed for a full-House vote at the end of May.
Just last week, a bipartisan House coalition repealed the SEC’s punitive SAB 121 accounting rules for crypto — a clear rebuke of Gensler’s aggressive tactics, and a sign there is Congressional appetite to move quicker than the typical glacial speed they are accustomed to with core crypto issues.
These moves demonstrate that lawmakers at least seem to grasp that if they don’t act soon to rein in Gensler’s crusade, they may end up protecting just a rump of what was once a vibrant American crypto industry.
What is to be done? Congress faces two key constraints: It’s an election year when major legislative lifts are difficult, and they must consolidate enough bipartisan consensus to push comprehensive crypto legislation over the finish line.
Fortunately, new polling indicates growing public engagement on the crypto issue which could provide productive tailwinds.
According to a recent Harris Poll, most voters don’t trust elected officials to understand innovative technologies like crypto, and over half are concerned about policymakers stifling innovation through heavy-handed regulation. Those sentiments are warning lights for the SEC and are opportunities for members of Congress. Former President Trump’s recent overtures embracing crypto and courting crypto-aligned voters should also add impetus for Congressional action.
Read more from our opinion section: No, ETH isn’t suddenly a security now
Ultimately, lawmakers must recognize that an overzealous regulator is attempting to unilaterally decide the fate of an ecosystem that is vitally important to America’s future economic competitiveness and technological leadership. This circumvents the proper role of Congress in setting foundational rules, and our elected officials should reassert their prerogative rather than ceding that power to crypto’s most fervent detractors.
The clock is ticking. As election day approaches, the impetus for Chair Gensler to gobble up even more crypto hens will grow stronger. Our nation’s legislative farmers must return to the crucial task of protecting and catalyzing the homegrown crypto ecosystem. They’re close to drafting fit-for-purpose rules that would clarify how the government understands and regulates crypto, though much more work needs to be done.
If they don’t move quickly, they may find the hen house empty and wonder why they didn’t act sooner.