The blockchain industry is looking to shed the negative association between digital assets and crime as the threat of additional regulatory oversight looms.
Crypto-focused lobbying groups in Washington, DC are playing an increasingly vital role in reorienting policymakers away from the view that digital currencies are used primarily for illegal transactions. Now, they are preparing for, potentially, their biggest battle yet.
The Blockchain Association, an industry trade group representing crypto firms, has added 10 members to its brass since December 2020, bringing its total to 34. Kristin Smith, the group’s executive director, told Bloomberg that the association’s members are extremely concerned about federal regulators clamping down on the industry over misplaced fears.
“We in the industry think it’s hugely problematic,” she said, adding that “It misses the entire point of this innovation.”
Smith was commenting on recent proposals by the Financial Action Task Force and Treasury Department to increase surveillance of the cryptocurrency market over concerns about money laundering and other illicit activities. The proposals, which could be finalized later this year, would place more burdens on investors and blockchain networks.
Coin Center, a leading DC-based advocacy group, is raising money in preparation for a lengthy lobbying battle or lawsuit over the proposed regulations. Jeremey Brito, the group’s executive director, told Bloomberg:
“Our job is to say absolutely there is a real risk here and that we all need to work together, but don’t throw away the baby with the bathwater.”
Grayscale, the world’s largest digital asset manager, donated $2 million to Con Center earlier this year. Twitter CEO Jack Dorsey also contributed $1 million to the advocacy group.
Despite concerns about sweeping government regulations, the threat of an outright ban on digital assets is long gone, according to billionaire investor Tyler Winklevoss. In a recent What Bitcoin Did podcast episode with Peter McCormack, Winklevoss said:
“I think that the U.S. will never outlaw Bitcoin. There’s too much precedent that’s been set in the courts. The Coinflip order, which was a CFTC [Commodity Futures Trading Commission] enforcement action which was upheld in the courts, considered Bitcoin a commodity like gold.”
Digital assets have reentered public discourse over the past six months as Bitcoin (BTC) charted new all-time highs and major institutions like Morgan Stanley and MassMutual got involved. On the corporate side, Tesla and MicroStrategy have added billions of dollars worth of BTC to their balance sheets — moves that many believe will normalize digital-asset exposure moving forward.
JPMorgan Chase, Citigroup, Goldman Sachs and BlackRock have all recognized Bitcoin’s emergence as a new asset class and, in some cases, one that could challenge gold for store-of-value supremacy.
Cryptocurrencies have reached several major milestones this year. The collective market capitalization of all digital assets topped $1 trillion in January before doubling less than three months later.