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 industry’s most important allies. However, the GOP’s pro-crypto bias may also be its downfall. From uncritical crypto “maximalism” to Orwellian surveillance paranoia, Web3’s industry bromides have crept into the party’s campaign rhetoric and, worse, its policy proposals. In seminal upcoming legislative opportunities, such as the House’s 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 candidate’s 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 blockchain’s 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 SEC’s 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 America’s “tax gap.” What is lacking in this partisan hothouse is any informed appreciation of blockchain’s potential or its importance to America’s 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 industry’s memeified rhetoric is evident even in the party’s innermost policy-making circles.
Take, for example, the Digital Assets Market Structure (DAMS) bill. The watershed draft legislation, penned in part by McHenry’s committee, marks Congress’s 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.
Elizabeth Warren is a builder, not a hodler. (Twitter)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.
There’s 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.”
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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 America’s 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 America’s 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 blockchain’s 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 America’s economic reach. Republicans should lead the charge.
The House’s latest draft stablecoin bill is a good start and underscores McHenry’s 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 doesn’t 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 author’s alone and do not necessarily reflect or represent the views and opinions of either Umami Labs or Cointelegraph.
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Alex O’Donnell is the founder and CEO of Umami Labs and worked as an early contributor to Umami Protocol. Prior to Umami Labs, he worked for seven years as a financial journalist at Reuters, where he covered M&As and IPOs.
