Name: Balancing the Ledger: What a Biden presidency means for crypto
Uploaded: 2020-11-11
Duration: 17 min 6 s
Description: Blockchain Association’s Kristin Smith says there is 'opportunity in a Biden administration.”

[MUSIC PLAYING] JEFF ROBERTS: Welcome to Balancing the Ledger, where tech and finance intersect. I'm Jeff Roberts. ROBERT HACKETT: And I'm Robert Hackett. JEFF ROBERTS: And today we're delighted to welcome Kristin Smith, Executive Director of the Blockchain Association. Welcome, Kristin. KRISTIN SMITH: Thanks, glad to be here. JEFF ROBERTS: I want to jump into the DC gossip in a second. But before we do, I'm hoping you can give us a really quick summary of what the Blockchain Association is or what it does. KRISTIN SMITH: Sure. The Blockchain Association is a trade association based in Washington DC. And we are made up of different crypto companies from across the crypto sector. And we work to improve public policy on behalf of the industry. JEFF ROBERTS: Our read of it has always been the Trump administration was not particularly friendly to crypto and Congress has stalled on it. Do you think any of that's going to change with Joe Biden presidency? KRISTIN SMITH: So I think we have opportunity in a Biden administration. If you look at the Trump administration, we had some pros and some cons. So the President himself very famously tweeted that he doesn't care for Bitcoin or cryptocurrencies, which obviously sets a negative tone for the rest of the administration. We have Secretary Treasury, Steven Mnuchin, who has questioned the value of cryptocurrency networks. But we do have a few bright spots. We have Brian Brooks at the OCC. We have Hester Peirce, who the President renominated to be a commissioner at the SEC. So there are some champions within the Trump administration. But I think what we see with a Biden administration is an opportunity to get some fresh faces into the key regulatory agencies, that might be more willing than some of the other regulators that we have today to move forward on policies that would be good for crypto. JEFF ROBERTS: I want to turn it over to Robert in a second, but that you mentioning key agencies, Jay Clayton at the SEC, most people think he is not a friend of crypto. How does it work in DC? Will he be replaced in January? And who might be coming in? KRISTIN SMITH: Yes, so for the regulatory agencies where there are supposed to be five Commissioners, it's like the SEC, the tradition is that three of those Commissioners, including the chair, be from the party of the President who is in power. So Jay Clayton should submit his resignation sometime prior to inauguration on January 20. And at that time, the President would then nominate one of the existing Democratic Commissioners, likely the more senior one, Commissioner Lee, to be the interim head of the agency until a time when a new nominee can get confirmed by the Senate Banking Committee. So whoever that long-term chairman of the SEC's going to be is going to play a key role in perhaps getting clarity on when securities laws apply to cryptocurrency projects, but also help paving the way for the use of Blockchain technology to trade securities. And so I think there's a lot of potential and a lot of room for someone new to come in and hopefully take some decisive action that will help the industry. ROBERT HACKETT: Now, Jeff and I have been hearing a lot from various crypto founders, from investors, that they're just fed up with the status quo in the US. Ripples recently released a number of places that it's thinking about maybe redesignating its headquarters, just because things have been so unfriendly here in America. What is your sense of how the US stacks up against the rest of the world? KRISTIN SMITH: I think it's really frustrating for innovators and entrepreneurs in the US to try to figure out how to operate. Over the past few years, there has been a call for more clarity. And then often what we see is instead of providing the rules outright, there's this rule-making through enforcement. And so you have to track these cases and try to dissect what might apply to your project and what doesn't. And I know that's very frustrating for a lot of our member companies. So I think we need to get some progress on that, because there are other countries around the world that have been welcoming to crypto and have been really forward-thinking in how to find the right structure. One of the challenges we have here in the United States is we have such a fractured financial regulatory system. We have the SEC that the securities laws. The CFTC, which deals with commodity futures. We have the OCC that deals with some of the banks. We have the FDIC that deals with others. And the Fed that deals with others. So it's a very fractured system, which makes it more difficult to come up with a unified policy. And so going back to the Biden administration, I think the fact that we have Gary Gensler, who is leading up the transition team for financial services agencies is a good sign. Because he is very familiar with crypto and Blockchain, and hopefully can put the right team of regulators together that will be more willing to work together to advance policies, so that we can keep these businesses here in the US. ROBERT HACKETT: I saw a lot of crypto folks excited on Twitter this weekend about Gary Gensler, but I confess I don't fully know who he is or why he's important. Do you want to unpack that a bit? KRISTIN SMITH: Yeah, so he's important. He's a former chairman of the CFTC, so he's been in government. He's been in these positions that require Senate confirmation that make decisions leading policy in this space. But he also teaches a course at MIT on blockchain and cryptocurrencies. So he understands this stuff very well. I think the biggest challenge we've had across the board, whether it's working with regulators or working with members of Congress, has been getting the knowledge level to a place where you could start to have conversations about the policy. Because as you guys well know, writing about this, it's very difficult to explain in a 20 minute meeting what is a cryptocurrency [AUDIO OUT] or what is a stable coin. What are the Web 3.0 applications that can be built using this technology. It just takes a tremendous amount of time and effort to get those concepts across. JEFF ROBERTS: I was slightly surprised to see that people were ready to embrace Gary Gensler. Because I seem to remember from a couple of years ago that actually he was maybe tamping down on enthusiasm around Ethereum and saying that people are treating it not as a security, when actually it might be. Maybe he has become more receptive to crypto since then. But I do remember that causing a little bit of a fracas when he made those comments. KRISTIN SMITH: No, I think he's been fairly receptive, and he's knowledgeable, and he's familiar with the industry. That is probably the most you can ask for when looking at getting people into these positions. That is a stark contrast from some of the regulators and congressmen who we've met with, who just out of the gate don't see any value, who don't have any understanding. Just the idea that we have somebody in there that knows what Ethereum is is a really good thing. Even if there's maybe some questions about it at certain times. So I think it's a good sign that he's there and I know that some of the names that have been-- this is like a name game right now. It's almost a parlor game of sorts here in Washington, trying to figure out who is going to be in these places and what can individual advocates and influencers try to do to help influence this process. But there are some good names that have been circulated that are on these short lists that we think would be overall more positive than most of the regulators that are in place today. JEFF ROBERTS: Let's turn to the Treasury Secretary. I know in crypto fantasy land, Andrew Yang would be the ideal choice. Probably a long shot, but let's indulge us, just let's gossip a bit. Who are some names who might be the Treasury Secretary? And what would that mean? KRISTIN SMITH: Yeah, so I think the leading name out there is Lael Brainard. Who I think would be neutral to mildly positive. I think a lot of what crypto is trying to do, especially on the payment side, is to come up with a competitive marketplace of solutions. And her coming from the Fed, I think has maybe a slightly different position on that. But that being said, she's very smart. She's on the list. Janet Yellen just popped up on the list pretty recently. She had not been there before. Roger Ferguson, who's the CEO of TIAA-CREF, who I think would be fantastic, is on that short list. So I think Treasury Secretary is one of those positions that is one of the key appointments for a President. It's a very, very big deal. It's going to signal a lot about what an administration might bring. And you have to remember, right now we're not totally certain on the outcome of the Senate, but it looks like the Senate is probably going to be run by the Republicans. And that's very important, because that means anyone that Biden would nominate to be Treasury Secretary has to make it through a Republican Senate. So that has taken names, like Elizabeth Warren, probably off the list and would probably be the same for Andrew Young as well. JEFF ROBERTS: Let's talk about Congress a bit. There's been bills come up all the time, get a de minimis exemption for crypto use. Just make it easier to operate. Is there any changes in Congress, or will there be time on the agenda for it? Because there's a little matter of an economic crisis, a pandemic. So I assume, as nice as that would be to have a blockchain bill, that's not coming soon. Or is it? So tell us what Congress is going to do in the coming year. KRISTIN SMITH: Yeah, Congress, there are certain members of Congress, in both the House and the Senate, that are very interested in crypto policy. So I do think that we will see the reintroduction of some of the bills from this Congress early next Congress. And perhaps see the introduction of more comprehensive pieces of legislation. Right now most of the legislation that we've seen introduced is over on the House side, so I think what will be different this Congress is we will see some Senate bills start to be introduced. Which is natural. The Senate tends to be a little bit more thoughtful than the House and less knee jerk reaction to things. And so I think the fact that the Senate would start to weigh in on these issues by introducing legislation is very important. I think that even though legislation doesn't always make it through the process, and I would be pleasantly surprised if we actually got up enough momentum to get something all the way through and signed into law in the next two years. But you have to understand that these bills also serve a very important role for signaling to regulators. It's a way for the SEC to have a sense of where political support is in Congress for certain issues. Same with the OCC and the CFTC and the IRS. It can put pressure on the agencies to act within the jurisdiction that the agencies already have. I think the one challenge with crypto is that it covers so many different spaces that it actually would be nice to have a more overarching framework and policy for regulators to deal within when looking at crypto. But I think that's something we could eventually get down the road. I would be pretty surprised if we got a bill out of committee or to the floor. But we're certainly going to try and we have a very precise list of bills I think we'd like to see introduced. And we're going to keep chiseling away at that process. JEFF ROBERTS: The new Senator from Wyoming, Cynthia Lumins, I believe her name is. KRISTIN SMITH: Yeah, Lummis. JEFF ROBERTS: Lummis, thank you, yeah. Says she owns Bitcoin. And as far as we know, she's the first Senator to own Bitcoin. But I'm curious the gossip you've heard in DC, how many members of Congress really own Bitcoin? And is the number growing? KRISTIN SMITH: I think a number is starting to grow a little bit. I know that there are a couple of members in the House who own Bitcoin. I haven't done a recent look at financial disclosures to see if any of them own enough to meet a meaningful threshold. But yeah, I think having Cynthia Lummis in the Senate is going to be fantastic. Wyoming has been a leader when it comes to creating a regulatory environment that's favorable for crypto. And so hopefully she can bring some of that same philosophy to the federal level. I think she's a fantastic member. I have met her personally, though haven't spoke to her in quite some time. But when I worked on the Hill for a Congressman from Montana, who was the neighbor to Wyoming, we frequently got the staff and the bosses together and shared a beer after work. So I think she's fantastic. I think she's very principled and very intelligent and is going to be a wonderful addition to the Senate. ROBERT HACKETT: One thing we can expect, I think, is the Democrats to pass some legislation, especially if they do get greater control of the Senate. The crypto community is sort of like famously Libertarian, they don't really like rules and regulations. But we're in this weird situation where a lot of these companies, they just don't know what to do or how to operate. There's been very little guidance. I'm wondering whether just-- what you see as what's coming on with government, whether that's going to provide wind in the sails for crypto or whether it's going to take some out? KRISTIN SMITH: Well, I'm hopeful that whenever something does start to move through the legislative process that it'll be something positive and not negative. That is my whole purpose of being here at the Blockchain Association, is to prevent the bad things and push for the good things. I do think, fortunately, it is a lot easier to stop legislation than it is to push it forward. So if there were something negative working its way through the process, I'd like to think we have the influence to prevent that from happening. I do think, though, if the Democrats do take the Senate, then the risk of something sneaking through that is not as constructive for crypto is much higher. And so we'll have to watch that closely. But we've grown our relationships on the Democratic side of the aisle in the past two years. I think there is a lot of interest, in particular around is this a technology that can help with financial exclusivity? Both in the United States and globally. And that is a conversation that seems to be working when we're speaking with Democrats. And so it's something that we're going to continue to push forward. And hopefully, regardless of the outcome of the Senate, we'll still be able to make some progress. But hopefully at the very least, is do no harm. JEFF ROBERTS: Speaking of crypto moving things forward. Perhaps this time it has to get its own house in order. Because by my count, there's like three or four different crypto associations. The Winklevoss twins seem to have won with Gemini. I don't know, Coinbase recently left your association, so are you going to be able to bring everyone into the fold to make a united stance in the next few months? KRISTIN SMITH: I hope so. This is something I hear from a lot of different participants in the industry, is that there are so many groups. What are the difference between all of them? And believe it or not, they all have slightly different functions. When it comes to lobbying Congress, there is a great organization, Coin Center, that does advocacy work in this space. But they're independent, they think about the technology and give their own opinions. Which are very good, by the way. But that's different than an industry trade association. So we're really the only trade association that has exclusively crypto company members in it. Some of the other organizations, like the Virtual Commodity Association and GDF and Adam, they don't participate in lobbying activity. And so they play an important role in bringing industry together. But yes, I think that if you look at other industries in Washington, crypto is like teeny tiny. And we are barely a blip on the radar in the minds of the greater community here in DC. And so I think that if we want to have success in Washington and win, we all need to be coordinated and working together. And I'm hopeful that as time moves on, that we'll be able to bring everyone and coalesce everyone together under one umbrella. JEFF ROBERTS: That's a good summary. That's all the time we have. Christine Smith, thanks so much for joining us. KRISTIN SMITH: Thanks for having me. [MUSIC PLAYING] 

Blockchain Association’s Kristin Smith says there is "opportunity in a Biden administration.”