Crypto Industry's Lobbying Power Grows As Former Officials Change Sides
The crypto industry is ramping up its efforts to secure favorable regulatory outcomes. "It’s a misunderstanding" that crypto is an unregulated wild west as there are plenty of regulations in place.
Crypto firms have been increasingly appointing former regulators and lawmakers in recent months. While the officially stated aim of such appointments is to help crypto industry better understand the regulatory landscape, it’s just as likely that the appointees have been enlisted to help firms lobby government and regulatory authorities more effectively.
But it’s not only former regulators and lawmakers who are joining cryptoasset companies, with former executives from the legacy financial system also jumping on the bandwagon. Together with former officials, these execs are not only helping improve the quality of leadership in crypto, but are also helping crypto to step up its lobbying game.
And according to lobbying data available in the United States, the big companies and trade associations are on course to break their spending records in 2021. This might be good news for the entire industry if we assume that claims by trade associations that they pursue the interest of all participants are true.
Coming to the crypto side
The list of ex-regulator/lawmaker appointments in crypto has been growing pretty steadily in 2021. Here’s a quick rundown of some of the most notable recent appointments, including hires of former financial executives:
- March 9 – Bybit appoints Daniel Lim, former head of legal and compliance for Singapore-based investment bank Daiwa Capital Markets.
- March 11 – Binance hires former Senator for Montana Max Baucus to “provide high-level guidance on the organization’s government and regulatory efforts including building strong relations with US authorities and regulators.”
- March 23 – Japanese exchange DeCurret hires former commissioner of the Japanese Financial Services Agency, Toshihide Endo.
- March 25 – Binance hires former Financial Action Task Force execs Rick McDonell and Josée Nadeau to advise on regulatory and compliance matters.
- March 29 – One River Digital Asset Management appoints former US Securities and Exchange Commission (SEC) chairman Jay Clayton to its advisory council.
- April 20 – Binance.US hires former US Acting Comptroller of the Currency Brian Brooks as its CEO, effective from May 1.
- May 24 – Coinbase hires former Goldman Sachs exec Faryar Shirzad as part of its efforts to “navigate the evolving global regulatory environment and work with governments around the world on critical issues surrounding the cryptoeconomy.”
These are only the most notable appointments, yet they create the impression that crypto is really ramping up its efforts to secure favorable regulatory outcomes.
According to Ekaterina Anthony, a board member of the Switzerland-based Crypto Valley Association, such cross-sector appointments indicate that the crypto industry is beginning to mature.
“As the market picks up, it will lead to industry leaders, including those who work for regulators, being on the side of new disruptive technologies. Undoubtedly, such leaders can accelerate the process of lobbying and regulatory adaptation,” she told Cryptonews.com.
Also, other industry participants suggest that most of the above appointments are more about ensuring the fullest possible compliance with existing regulations.
"More likely such appointments have been made from a compliance perspective — to help companies understand and more effectively navigate an ambiguous and ever-evolving legal and regulatory framework," said Gabriella Kusz, a member of the board of directors of the US-based Global DCA (Global Digital Asset and Cryptocurrency Association). "Identifying and including former regulators and legislators helps to better understand, anticipate and ensure alignment with current and potentially future legal and regulatory requirements for crypto businesses."
This is a view shared by the Blockchain Association’s Graham Newell. While he agrees that there’s likely some lobbying motive behind at least some of the recent appointments, he also suspects that many of the hires are motivated by a desire to improve leadership and to expand.
“While these hires might help a company better understand the path from idea to policy or new regulatory action, I would assume that the primary attribute that these companies are looking for is whether a new hire can help them grow their core business. Brooks, in particular, has deep experience in crypto, as well as a good understanding of the government’s regulatory machinery following his stint at the [Office of the Comptroller of the Currency],” he told Cryptonews.com.
Even so, it’s clear from many of the press releases accompanying recent hires that a lobbying motive is very much present. With McDonnell and Nadeu’s appointments, for example, Binance, which is now reportedly being investigated in the US, stated that one of the main aims was “to support its overall objective to build stronger relations with regulatory and law enforcement bodies worldwide.”
In other words, lobbying. And this assumption is supported by the latest data on lobbying in the US, as compiled by OpenSecrets.org.
If you take a look at Coinbase’s entry in OpenSecrets’ database, you see that it’s on course to spend a record amount on lobbying in 2021. Its lobbying spending has been growing consistently every year since 2017, and even though it has data only for Q1 2021, this shows a noticeable growth over Q1 2020.
An increase is also visible with the Blockchain Association, whose members include Binance.US, Blockchain Capital, BlockFi, Circle, Digital Currency Group, eToro, Grayscale, Ledger, Polychain Capital, Ripple, Stellar, Uniswap, and numerous others. Its Q1 2021 spend also exceeds that for Q1 2020, standing at USD 130,000 (its total spend for 2020 was just under USD 500,000).
According to the Blockchain Association’s Graham Newell, what most crypto organizations and firms are lobbying for is clearer, more transparent regulation.
“It’s a misunderstanding that persists in much of the mainstream media and legacy financial worlds that crypto is an unregulated wild west. There are plenty of regulations in place that cover the crypto industry, both for individual consumers and large corporations. What we, and others, would like to see is further clarity on important issues, such as securities laws, custody provisions, and tax policy,” he said.
Likewise, the Global DCA says it’s pursuing fair regulation.
“Our focus and our task are simple: balanced regulation. Balanced regulation — which nurtures innovation and allows for further development of the industry while at the same time protecting consumers and the general public,” said Gabriella Kusz.
As Cryptonews.com reported in the past, there’s a worry that lobbying may be conducted from the perspective of larger crypto firms, with any resulting regulation harming smaller companies. However, pretty much every trade association says that it aims to represent all members of the industry, large and small.
The CVA’s Ekaterina Anthony explains, “In our association, we listen to the opinion of all market participants, which we call the private sector, and we regularly inform the regulator of our consolidated opinions and requirements. We also work with other countries and associations that bring together crypto startups and big businesses, and most participants have very similar expectations and goals.”