(Bloomberg) -- Over the last few weeks, the crypto industry has been doing victory laps from Silicon Valley to Washington. With a pro-crypto president-elect, a new AI and crypto czar, and the pending exit of Securities and Exchange Commission Chair Gary Gensler, the future of digital assets in the US has never looked more promising.
And while the ushering in of a crypto-friendly administration presents an opportunity that many describe as once-in-a-lifetime, it’s also uncharted territory for an industry whose relationship with politicians and regulators has often been fraught. Whether it’s giving the appearance that proximity equals power or being divided on legislative priorities, the crypto industry is coming head-to-head with a new challenge: how best to navigate the maze of power and influence in the nation’s capital as a unified front.
“Crypto is having a ‘Welcome to Washington’ moment,” said Jennifer Schulp, director of financial regulation studies at the Cato Institute. “In some ways, it shows that the industry could have been rightly criticized for a number of years for not understanding how DC works. They’re getting better at it, except they’re showing everyone in real time.”
Since the November election — one which saw crypto companies pour more than $130 million into campaigns – Donald Trump has selected crypto advocates for key roles in his new administration, including Cantor Fitzgerald LP’s Howard Lutnick as Commerce secretary and Paul Atkins to run the SEC.
Now, everyone wants in – and to look like it, too. Kris Marszalek, chief executive officer of exchange Crypto.com, posted a photo in December on X of him and Trump at Mar-a-Lago alongside the caption, “Honored to have a seat at the table.” His visit comes after Coinbase Inc. CEO Brian Armstrong held a phone discussion with the president-elect a month earlier, Fortune reported at the time.
But a handshake at Trump’s Florida club or the floating of a nomination reveals little about who is pulling the industry’s political levers of influence. Even Trump’s long-awaited pick for artificial intelligence and crypto czar, venture capitalist David Sacks, came as a surprise to most – including those tuned into Beltway scuttlebutt. Kristin Smith, CEO of the Blockchain Association, a prominent crypto trade group in Washington, found out about the Sacks nomination the same way everyone else did: social media.
“That one was a surprise to me,” Smith said. “I was at dinner, and I got Truth Social alerts on my phone, and I was like, what?”
Then in a statement on Dec. 22, Trump announced the appointment of Bo Hines as the executive director of the Presidential Council of Advisers for Digital Assets, and Sriram Krishnan as senior policy adviser for artificial intelligence at the White House Office of Science and Technology Policy. Hines, a 29-year-old former Republican congressional candidate, and Krishnan, a former general partner at Silicon Valley venture capital firm Andreessen Horowitz, will work with Sacks.
Yet despite clarity on who will be advising Trump, the contours of the policies they will recommend remain anyone’s guess.
“When you get down to the nuts and bolts of it, those in crypto probably don’t agree on the actual policy that will take us forward,” said Neeraj Agrawal, director of communications at the Washington-based crypto research and advocacy nonprofit Coin Center. “And they definitely don’t agree on what the priorities should be.”
Going into the new administration, the industry’s primary legislative concerns are around market structure, stablecoins and banking access. The Financial Innovation and Technology for the 21st Century Act, which aims to establish a regulatory framework for the digital-asset market, won a bipartisan majority in the House last year and was backed by some of the largest crypto companies, including Coinbase, Circle, Block, Kraken and Gemini. But after the bill’s passage, many were unsatisfied and raised concern about the way it addressed issues such as decentralized finance, or DeFi, and the role of the Commodity Futures Trading Commission versus the SEC, according to Schulp.
“We’re interested in a narrowly-tailored market structure legislation,” said Smith of the Blockchain Association. “We haven’t seen the bill that makes quite the right sense for the industry yet.”
Republican Representative French Hill of Arkansas, who is the incoming House Financial Services Committee chairman-elect, said that House Majority Leader Steve Scalise wants to move a comprehensive crypto market-structure bill in the first 100 days. But re-opening the conversation around such an all-encompassing bill could lead to more divergent agendas to pop up again, according to Schulp.
“It’s not to say that’s not what should be done, but it does tend to mean that things are not settled,” Schulp said. “Breezing through any sort of legislation or regulation is going to be difficult because there’s a lot of different interests at play.”
Also in the legislative mix is a bill that would create a strategic reserve of Bitcoin, as proposed by both Trump and Wyoming Republican Senator Cynthia Lummis last year. However, since floating the idea at a Bitcoin conference in July, Trump has said little publicly about his plan for the stockpile, nor what he thinks of the Lummis bill, which would order the sale of Federal Reserve gold certificates to fund the purchase of Bitcoin for the reserve.
Meanwhile, passing stablecoin legislation could be considered more “low-hanging-fruit,” according to Miller Whitehouse-Levine, CEO of decentralized-finance research and advocacy group DeFi Education Fund. Representative Patrick McHenry introduced the “Clarity for Payment Stablecoins Act of 2023,” while Lummis and New York Democratic Senator Kirsten Gillibrand put out a joint “Lummis-Gillibrand Payment Stablecoin Act” last year.
“There’s a broader consensus around what stablecoin legislation should look like,” said Whitehouse-Levine. “The McHenry bill that was marked-up in mid-2023 has been well-socialized and was negotiated with [Democratic Representative Maxine] Waters. I think that anything that passes will look largely similar to that bill.”
However, prioritizing stablecoin legislation could compete with staunch advocates for market-structure legislation and face hurdles regarding whether stablecoin policy should be led by state or federal government.
“Competing interests within the crypto industry is something that’s been an issue for a long time,” Schulp said. “It just becomes more difficult when you’re actually handed the baton and told to run with it.”
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