How US Regulators Are Derailing Crypto

Former Umami CLO Alex Golubitsky returns to the show to discuss the recent spat of crypto enforcement and legislation in the United States.

Samuel McCulloch
Samuel McCulloch
Apr 26, 2023

What the hell is going on in the US right now?

How can a country that literally sparked global dynamism and helped entire populations throw off the chains of fascism and communism in the 20th century now be standing in the way of technological process?

I don't want to be politically divisive here, as anti-crypto sentiment is evident in both major political parties in the United States. But there is a contingent in Washington, who is fighting tooth and nail to ensure that our industry is neutered and driven offshore.

The current administration is pursuing all enforcement options against the crypto industry in a bid to protect existing financial services companies, all in the name of protecting consumers. Now this isn't to say that there is fraud and other illegal actors in our industry nor is this a call for a complete disposal of the rule of law. No, what I am talking about is a framework for crypto that allows companies to operate and grow and be legally compliant.

I guess it's to be expected with the size of our industry. At over $1 trillion it now has enough wealth value to potentially harm the greater economy. Especially with the uptick in stablecoin adoption, crypto is gaining steam globally.

But American regulators and lawmakers love little walled gardens where they can fully surveille and control all transactions taking place. The post-9/11 world radically changed the relationship between financial services companies, the government, and us. Expectations of financial privacy, and the ability to stash money away in offshore accounts suddenly became incredibly difficult. Over the course of two decades, the United States and its partners have tried to fully destroy the ability of any individual, company, or nation-state to secure their money inside and outside their borders.

Crypto is a technology that is permissionless in nature. The widespread crack down and enforcement happening now is a byproduct of their inability to control and shut down our industry. Unfortunately, they've had over a decade now to understand how these technologies work and where the pain points are. Front-ends will soon become selective over the smart contracts they connect too. Banks are already ditching customers and companies who transact in crypto. Every three litter agency is putting roadblocks in place for entrepreneurs who want to build with this novel technology. Long-standing definitions are being changed without comment to further crack down on public companies.

The sad thing is, is that all of this is being done publicly by a group of unelected bureaucrats, who will face zero repercussions from a divided Congress. The Biden administration chooses who will lead these agencies, and also can fire them at will. Gary Gensler has the explicit support of the White House and most individuals in the Democratic Party for the damage that he's doing to the crypto industry. And while there is some Republican support, the party is divided with some members. Disgusted with what they think is rampant speculation and fraud, it's no surprise that in the week of FTX, some politicians such as Elizabeth Warren are building "an anti-crypto army."

So what can we do? How can we affect change?

The industry must become more politically active by supporting those advocates on the ground in both our nation’s and state’s capitals. Sitting congressman, who are up for reelection that disagreed with their industry must be voted out (some Senators that are up for re-election include Elizabeth Warren and Sherrod Brown). We need to form Super PACs and other political entities that seek to replace octogenarian luddites, with younger candidates with fresh ideas who better aligned with our ethos and mission in the space.

We probably need to do a show on this, but DeFi Dave worked on the hill before he found crypto. He understands the difficult work that goes into setting policy and implementation of new laws. Internally at Flywheel, we've spoken about how we is an organization can push forward stablecoins as a means to solidify Frax's existence.

This is why we need you intrepid readers.

If you would like to join us to fight in Washington, please get in touch in our Telegram. We need your support and help. Our collective voices will make a difference but only if we stand together strong.

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