Rep. Jake Auchincloss is no crypto bro.
Granted, the 34-year-old has been following the space since hearing about it in 2015 while a graduate student at the Massachusetts Institute of Technology. And sure, Auchincloss soon after bought some stock in a crypto-linked company while working at a cybersecurity startup, before eventually offloading it in March. He even explored how Liberty Mutual could use blockchain technology while working at the insurance giant’s innovation lab.
Auchincloss is adamant, though: He’s not “head over heels” about crypto or Web3, referring to the decentralized, blockchain-built version of the Internet. But Auchincloss is not antagonistic about it, either. Rather, the Massachusetts Democrat is part of a new generation of crypto-curious lawmakers on the left—a small but growing group that is making it known that they see plenty of promise in blockchain technology, and that Congress shouldn’t screw it up.
“We are seeing a surge in interest among Americans, especially young Americans” in crypto, Auchincloss tells Fortune. “Democrats need to accommodate that. We’re the party that really speaks to issues that young people are invested in. And crypto is clearly one of them. It would be a blindspot for us to not have a coherent policy toward crypto.”
‘Too big to ignore’
The word “crypto” carries newfound weight today in Washington, D.C., whether it be in the halls of Congress, the Securities and Exchange Commission’s headquarters on F Street, or even the White House.
Just two years ago, crypto was only a $250 billion market with problems that were, frankly, seen as far afield from the issues of the day in the nation’s capital. Not anymore. Following a two-year-long boom steered by Wall Street traders, Silicon Valley’s biggest investors, and everyday Americans piling into the market, along with all of its appendages like NFTs, the now $1.7 trillion crypto market is, on some days, the issue in D.C. “We’re in a position where it’s too big to ignore,” says Ryan Selkis, CEO of crypto data and research company Messari.
And while the SEC have somewhat controversially begun ramping up its oversight of the crypto markets and President Joe Biden’s administration has directed seemingly everyone in the federal government to begin studying crypto, perhaps the next and biggest battle over the future of crypto policy is set to play out in the months ahead on Capitol Hill, where lawmakers are ravenously looking for any detail they can find about the once-niche industry.
“Listen, when we started this effort over three and a half years ago, we were sort of begging to talk to anybody who would be interested in having a conversation,” says Kristin Smith, executive director of a crypto trade group called the Blockchain Association. “Now we’re very much triaging requests that are coming in and trying to make sure that we’re being a resource.”
Crypto is not a new issue to Congress, though. Was it once obscure, followed only by a select few lawmakers embedded in the intricacies of financial technology and markets? Yes. Is it new? Not so much. Talk of crypto, in fact, first popped up not too long after the release of the Bitcoin white paper in 2008 with Silk Road, the digital dark market where crypto was the currency of choice. And the list has swelled over the years. There was the initial coin offering bonanza of 2017, Facebook’s Libra project, the seemingly countless hearings about central bank digital currencies. And on, and on, and on it went.
Republican lawmakers—perhaps prescient in seeing the makings for crypto to become the financial and political force it is today—represented some of the industry’s most fervent allies on the Hill over the years. Democrats’ loudest voices on crypto, meanwhile, came from Sen. Elizabeth Warren of Massachusetts and Rep. Brad Sherman of California. For years, the two lawmakers have continually expressed resounding concerns about the very nature of the asset class and the swell of interest that individual investors have taken in the space, especially with hacks, rug pulls, and good-old-fashioned pump and dumps remaining somewhat commonplace.
It was a chasm along party lines that seemed likely bound for the same divide that exists between Democrats and Republicans over issues stemming from more traditional markets as well. The left preaches ‘investor protections.’ The right talks of the ‘importance of free markets.’ And eventually, the two sides either move on, come together behind closed doors for a more nuanced approach, or the controlling party in Congress just powers through.
Or at least that seemed to be the case until late 2021, when a tax-reporting measure tucked inside the White House’s colossal infrastructure package ignited an uproar in the crypto community—and awoke lawmakers on both sides of the aisle to the market, the potential, the issues, and the need for Congress to start taking a hard look at it all.
Crypto’s appeal to Democrats
Ever since the infrastructure bill, Democrats have started to become more outspoken and enthusiastic about crypto. It’s not that they’ve been reborn as free-market ideologists or libertarians. (Bitcoin has long had a following among libertarians.) But Democrats, simply, seem to be opting to see the potential in crypto and blockchain.
Sen. Ron Wyden cites remittances as an example. In a recent interview with the Financial Times, the veteran Oregon Democrat, who joined Congress in 1981, seemed to indicate that crypto could be an upgrade for “somebody who has a kid 1,000 miles away and wants to get them help in an emergency, rather than going through scores of banks, credit card companies.”
Just a few days later, Rep. Ritchie Torres, a freshman lawmaker from New York, penned an op-ed in the New York Daily News, making, as the piece is entitled, “A liberal case for cryptocurrency.” In it, Torres writes that crypto has the potential to give “the lowest-income Americans, especially immigrants, more freedom to transfer their own money and send remittances to their loved ones abroad without the burden of long delays and high fees.”
Auchincloss, a fellow freshman in the House, tends to see crypto through the lens of “what problem does it solve,” he says. Perhaps that means blockchain technology can eventually create a cheaper, faster, and more fair financial system or even a better alternative to streaming platforms like Spotify for musicians trying to make a living online, Auchincloss wonders aloud on the phone with Fortune. But either way, Auchincloss thinks Congress should take a “tech-agnostic” approach to looking at the industry—one where it’s focused on “core structural issues” like “market integrity for the exchanges, auditing the disclosures of stablecoins, consumer protection from fraud and abuse, strengthening the U.S. dollar as the world’s reserve currency.”
“We’ve got to think with first principles about these issues,” says Auchincloss, who has been working on developing an auditing and disclosure regime for stablecoins. “But we should not become either infatuated with or hostile to this new technology. It’s a tool. It’s not a craft itself.”
The way Rep. Ro Khanna of California sees it, blockchain is simply a technology. “[Crypto] has the potential for decentralizing ownership, decentralizing economic opportunity, and, to that extent, it’s a promising tool,” Khanna, who is part of the Congressional Blockchain Caucus along with Democrats like Auchincloss and Torres as well as several Republicans, tells Fortune.
And yes, Khanna recognizes that there are more than plenty of cases where it can be and has been abused. But the former Obama administration official, who recently teamed up with two Republicans along with fellow Democrat Rep. Darren Soto of Florida on a bill that would give the Commodity Futures Trading Commission more oversight over the crypto markets, still thinks “everyone should embrace the technological innovation”—Republicans and Democrats alike.
“I don’t think it ought to be partisan because it’s a technology. It’s like saying people are for or against the Internet. That doesn’t make sense,” Khanna says. “What we need to do is acknowledge people’s fears. Are you going to have all this illicit activity? Are you going to have young people putting their money into a token that loses value? How do we protect against those fears, while acknowledging that blockchain has a potential to do good?”
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