As 2022 begins, America approaches the first anniversary of Joe Biden's presidency. Following the ambitious start of the mandate, recent months have witnessed a serious tumult surrounding the overall health of the United States economy, the management of the COVID-19 pandemic, and the tense debate surrounding the opus Biden magnum: the $ 1.7 trillion Build Back Better. infrastructure legislation plan.
But even as the Democrats' ability to maintain undivided power after the 2022 midterm elections may raise doubts, the party's predominant view on cryptocurrencies has been consolidated more than ever. The incumbent president's party will set the tone for the regulatory discussion for at least three more years, so a thorough analysis of the fundamental premises and potential directions of its emerging crypto stance is necessary.
The narrative arc
The path that mainstream Democratic thought on cryptocurrencies has traveled over the past three years is perfectly captured by an anecdote featuring two public statements related to cryptocurrencies made by Clinton. One is that of the 42nd US President, Bill Clinton, then 72, who said at Ripple's Swell Conference in October 2018 that the Blockchain's "permutations and possibilities" were "astonishingly cool".
Three years later, speaking at the Bloomberg New Economy Forum in Singapore, Bill's wife and former presidential candidate Hillary Clinton, while calling cryptocurrencies an "interesting" technology, warned of their power to undermine the US dollar and destabilize nations: "maybe starting small but going much bigger. "
This striking difference of opinion within the power couple reflects the recent evolution of the Democratic Party itself: from a "third way" centrism, favorable to the business, technology and finances of its generation of the 1990s, to the newfound statism. with a strong emphasis on redistributive justice. and large government projects. By today's standards, the former first lady sounded quite balanced compared to her party's partner, Sen. Elizabeth Warren, who has been famously lashed out at the cryptocurrency market after the outbreak of volatility in early September:
Proponents say that crypto markets are all about financial inclusion, but the people who are most economically vulnerable are the ones most likely to have to withdraw their money faster when the market falls. [...] High and unpredictable fees can make crypto trading really dangerous for people who are not rich.
Warren berated crypto on numerous occasions, calling it "fourth rate alternative to real currency" that is to say "unsuitable as a medium of exchange; " to "lousy investment, "That" has no protection for the consumer ", and a tool that facilitates many illegal activities.
Beyond Senator Warren
The negative sentiment is largely shared by Senator Sherrod Brown, who is arguably even more unsettling given his status as chairman of the United States Senate Committee on Banking, Housing and Urban Affairs. Brown's opening remarks at Congressional hearings have never been crypto-friendly. Its general spirit can be summed up in the introduction that Opened the July hearing titled "Cryptocurrencies: What are they for?"
All of these currencies have one thing in common: they are not real dollars, they are not backed by the full faith and credit of the United States. [...] And that means everyone puts Americans' hard-earned money at risk.
Brown blamed the "cottage industry of decentralized financial schemes" for an attempt to create "a parallel financial system without rules, without supervision and without limits", calling it "a murky and fuzzy web of funny money online", without anything democratic. or transparent about it. The legislator repeatedly rejected the notion that cryptocurrencies could be an alternative to legacy money, most recently in a December Congress Hearing:
Stablecoins and crypto markets are not actually an alternative to our banking system. [...] They are a mirror of the same broken system, with even less responsibility and no rules at all.
However, not everything is dark. A figure representing a more moderate, if not pragmatic, approach to crypto, Congresswoman Maxime Waters, would also play a significant role in any future outcomes for the industry. As chair of the House Financial Services Committee, she initiated the Democratic Members Digital Assets Task Force with a mission to ensure responsible innovation in the cryptocurrency and digital asset space and "meet with leading regulators, advocates, and other experts on how these new products and services are reshaping our financial system."
Related: Lines in the Sand: The US Congress is Bringing Partisan Politics to Cryptocurrencies
Senator Waters has Recognized that "Americans are making more and more financial decisions using digital assets every day," and stated that his Committee will explore "the promise of digital assets by providing faster payments, instant settlements, and lower transaction fees for remittances." .
What's it all about?
The good news is that underneath the fearsome oratory is a keyword: regulation. It's clear, at this point, that an all-out China-style war on cryptocurrencies is not an option in the U.S. Hence, fueling the heated activity of congressional committees and federal agencies in recent years. months is a clear intention of the Democratic establishment to resolve the rules of the game before the next presidential elections.
Part of this effort by the Biden administration is the launch of the President's Task Force on Financial Markets, a superhero team comprised of executives from the SEC, CFTC, OCC, FDIC and the Federal Reserve System, with the secretary of the Department Treasury leading the group.
So far, the key output of the Task Force is a 26-page report on stablecoins, advising Congress to designate some activities related to stablecoins, such as payment, clearing, and settlement, as "systemically important" ( which would inevitably lead to stricter supervision) and limiting stablecoin issuance to insured depository institutions, i.e. banks.
As in the pre-Biden era, the main problem lies in the central classification of digital assets. The PWG report did not propose a novel interpretation and did not prioritize a single regulatory body, thereby perpetuating a situation where a variety of regulators oversee different types of cryptocurrency-related activity.
In October, Rostin Behnam, the President of the Commodity Futures Trading Commission and a member of the Democratic Party, claimed that up to 60% of digital assets can be classified as commodities, which is tantamount to proposing that the agency become the top US cryptocurrency regulator. He also claimed that his agency, as well as the Securities and Exchange Commission, they would probably need "a regulatory structure for both securities and commodities." How exactly would that help? the current mosaic approach to regulation remains a mystery.
The Democratic Cause
There are several reasons to believe that the largely proclaimed activity of 2021 will be followed by some real action the following year. The first is the general idealistic mentality of the American Democrats. For example, the drive to aggressively regulate big tech is an integral part of this mindset.
While President Barack Obama and some regulators work Along with Google and Twitter to facilitate the growth of Internet businesses, the Joe Biden administration came to power amid the wave of popular anxiety over international cyberattacks, personal data leaks, mismanagement of the crisis of Meta and the huge overall influence on the political process accumulated by the tech goliaths.
While Meta and Google have been fighting federal and state regulators in court over allegations of anticompetitive conduct for a while, Biden's team has also vowed to hold tech companies to account for the toxic speeches they harbor and strengthen. anti-competitive police practices.
However, in 2021, we have not witnessed any significant political step in this direction. Neither of the top two pieces of legislation: Amy Klobuchar's bill, which would ban big tech platforms from favoring their own products and services, and a House Democrats' bill that seeks to remove some protections given to businesses. of technology by Section 230 of the Decency of Communication. Act - has become law.
The second reason behind the Democratic rush to bring cryptocurrencies within the regulatory perimeter is pragmatic: The Biden administration and its allies on Capitol Hill need money. Biden's first term agenda is largely based on ambitious Roosveltian infrastructure projects. While the $ 1.2 trillion Infrastructure investment and employment law It managed to garner bipartisan support and was enacted on November 5, the Build Back Better Act, now hanging by a thread after Democratic Senator Joe Manchin announced his opposition to the current draft, would cost nearly $ 2 billion.
By some estimates, if it reached the president's desk, the spending program would increase the deficit by $ 360 billion over 10 years, making it urgent to collect more tax revenue. This is what makes a thriving crypto industry a major battleground for Democrats, who see the possibility of getting some cash and the urgency of preventing tax evasion through digital tools.
Whats Next?
There is no doubt that the Biden administration will continue with a strict regulatory agenda in 2022. We will see more hearings in Congress next year, but even more momentous negotiations will take place behind closed doors, where Democrats will ultimately have to decide whether to do so. SEC, CFTC or any other body should dominate the oversight of cryptocurrencies. In spite of Sharrod Brown's Recent Comments "With or Without Congress"It's also hard to believe that Republicans will let their opponents decide the fate of the industry for themselves.
