The cryptocurrency industry is gearing up for a showdown with regulators in Washington as the Securities and Exchange Commission (SEC) chief Gary Gensler is expected to testify before Congress next week.
The nonprofit group Stand With Crypto, backed by major crypto firms like Coinbase, is launching an advertising blitz targeting federal lawmakers in swing states ahead of Gensler's anticipated appearance before the House Financial Services Committee on September 27.
The campaign urges constituents to call their representatives and request support for the Financial Innovation and Technology for the 21st Century (FIT21) Act, a bill favored by many in the crypto industry that would provide regulatory clarity. Dozens of crypto CEOs, including Coinbase's Brian Armstrong, will also descend on Capitol Hill for a Stand With Crypto Day on September 27 to press lawmakers.
The mobilization reflects growing frustration in the crypto sector with the SEC's aggressive oversight and skepticism under Gensler's leadership. The regulator has taken an enforcement-first approach, filing lawsuits against firms like Coinbase while dragging its feet on clear rulemaking. With legal battles defining the regulatory landscape, crypto advocates say businesses and consumers alike lack certainty.
"The crypto industry is engaged and wants both clarity and protections as consumers and job creators," said Kara Calvert, head of U.S. policy at Coinbase. "We intend to help them make sure their voices are heard loud and clear."
The advertising push focuses on nine battleground "swing states": Arizona, California, Georgia, Illinois, New Hampshire, Nevada, Ohio, Pennsylvania and Wisconsin. Crypto has exploded in popularity in recent years, with over 52 million Americans now owning digital assets. Backers are betting that mobilizing crypto-friendly constituents could sway undecided lawmakers.
The timing coincides with growing scrutiny of the SEC chief's hardline regulatory approach. Gensler is expected to testify before the House Financial Services Committee next week, according to reports. In April, Republican lawmakers grilled Gensler about his "regulation by enforcement" stance during an oversight hearing.
The regulator sued Coinbase in June over unregistered asset sales, which the company contends were not securities. Legal experts say battles like this are defining crypto rules while Congress drags its feet on legislation. Crypto advocates argue the uncertainty stifles innovation in the promising sector.
"You're either for moving forward on crypto legislation and crypto regulatory clarity or you're not," said Calvert. She argued a House vote on the FIT21 Act would be a definitive vote for or against crypto.
The lobbying push also comes as the crypto industry ramps up spending to influence policymakers. Coinbase more than doubled its lobbying to $3.4 million last year, the most of any crypto firm. It has spent $1.4 million so far this year.
Whilereasonable regulation is appropriate, the SEC's aggressive approach risks chilling innovation in blockchain technology. Bitcoin and decentralized systems can empower individuals and communities.
I predict the crypto industry mobilization will place pressure on lawmakers leading into the hearing. However, substantial legislative action remains unlikely this Congress given partisan gridlock.
The conflict echoes past clashes between disruptive technologies and regulators, like the government's antitrust case against Microsoft in the 1990s during the rise of personal computing. Similar to crypto, the internet confounded regulators in its early days.
Cryptocurrency is experiencing growing pains as this groundbreaking technology matures. But the SEC should collaborate with the industry to foster responsible innovation rather than stifle it through overreach. Sensible guardrails that protect consumers while enabling entrepreneurs will boost America's leadership in this critical sector.
How can crypto investors manage risk during regulatory uncertainty?
Crypto investors should take prudent steps to manage risk during this volatile period:
- Diversify holdings across asset classes, avoid overexposure to crypto.
- Closely research projects and teams before investing in tokens. Favor established, transparent projects with concrete use cases.
- Keep detailed records of crypto purchases and sales for taxes. Consider realizing losses to offset gains.
- Store assets securely in hardware wallets rather than on exchanges when possible. Use multi-factor authentication.
- Stay up to date on regulatory developments and consider consulting a tax professional experienced with crypto.
Adopting defensive investment strategies and conducting due diligence will help crypto investors navigate the choppy waters of emerging regulation.
What should crypto firms do to encourage sensible regulation?
Crypto firms can take proactive steps to encourage sensible policies:
- Engage constructively with regulators to help craft appropriate rules. Participate in public comment periods.
- Fund research on crypto's risks and benefits to inform policymaking. Support pilot programs exploring blockchain applications.
- Implement robust compliance programs that exceed minimal standards to build goodwill with authorities.
- Clearly communicate to users the risks as well as the rewards of crypto products and decentralization principles.
- Foster a culture of transparency, security, and financial inclusion industry-wide to combat perceptions of crypto as enabling illegal activity.
- Develop tailored self-regulatory standards in consultation with government agencies and consumer protection groups.
Taking collaborative, proactive measures will demonstrate crypto firms' commitment to effective oversight that balances innovation and consumer protections. This can encourage pragmatic regulations and continued U.S. leadership in the sector.