Crypto policy should empower builders, not speculators
TechFlow Selected TechFlow Selected
Crypto policy should empower builders, not speculators
Speculation is merely a fleeting opportunity; without change, one will be consumed.
Navigating Web3 tides with focused insightsAuthors: Christian Catalini, Jai Massari, Rebecca Rettig
Translation: Block unicorn
If the U.S. wants to lead in cryptocurrency, artificial intelligence, and other cutting-edge technologies, it needs clear rules that recognize the economic value these innovations can bring—especially by restoring competitiveness in the tech sector. Unfortunately, neither presidential candidate appears to grasp this.
Cambridge—The cryptocurrency industry is pouring hundreds of millions of dollars into the November 2024 U.S. presidential election, backing candidates who support sensible regulation. Despite this massive investment—the industry has become the top donor sector in this cycle—it remains unclear how either candidate will address the issue or prioritize builders over speculators.
The average observer may know that Republican candidate and former President Donald Trump has stepped forward in support. At a recent Bitcoin conference, he pledged to make America the “global capital of cryptocurrency,” establish a strategic Bitcoin reserve, and embrace stablecoins. The audience responded enthusiastically. Yet Trump’s bold rhetoric highlights the industry’s biggest challenge: for years, policy debates have been dominated by those seeking financial speculation through the technology, while those aiming to build meaningful systems have been sidelined.
Democratic candidate and Vice President Kamala Harris has remained largely silent on the topic—but now she has an opportunity to propose a more thoughtful and progressive policy on financial innovation. Cryptocurrency policy, much like AI policy, is fundamentally about innovation and national competitiveness. For the U.S. to lead in this strategic domain, the next administration must first replace the current cohort of crypto-hostile financial regulators—particularly Securities and Exchange Commission (SEC) Chair Gary Gensler, who has consistently refused meaningful dialogue with the industry.
But simply appointing regulators more sympathetic to quick-profit mentalities won’t help either. Cryptocurrency’s greatest strength—its ability to incentivize open network development—is also its biggest burden. Like the 19th-century railroad mania, crypto has driven valuable new infrastructure, but it has also been exploited by bad actors for scams and fraud—SBF (founder of FTX) being a prime example, someone who knew how to game an inadequate regulatory framework.
Companies engaged solely in speculation—or outright fraud—benefit most from ongoing regulatory confusion. Worse, many firms proactively advocating for regulation or attempting to cooperate with regulators have faced enforcement actions, losing access to essential banking services as a result.
Regulators often lack incentives to adapt existing rules to new technologies, and incumbent stakeholders frequently give them reasons to maintain the status quo. In crypto, accountability for misconduct comes too late—if at all—leaving consumers to bear the losses. Without clear rules, market participants with established operations or banking needs are reluctant to explore the technology regardless of its potential. The result is a system that rewards recklessness and fraud while stifling innovators who aim to improve payment systems, reform finance, protect data privacy, or tackle monopolistic practices by big tech.
Thoughtful crypto regulation requires more than just appeasing Trump-style rhetoric. This issue extends far beyond cryptocurrency. If the U.S. is to remain a leader in AI, defense, and other fields, it needs rules that acknowledge the substantial economic value generated by innovation-intensive sectors—particularly by restoring competition. This is a complex task; success depends not on pandering to Bitcoin maximalists or merely legalizing stablecoins.
Consider Trump’s proposal for the U.S. government to hold Bitcoin as a strategic asset. While clearly bullish for Bitcoin’s price, it’s unclear how this serves the national interest. Instead, the federal government should treat blockchain-based networks as critical infrastructure—akin to 5G.
The government should not blindly support domestic Bitcoin mining without encouraging renewable energy use, stranded energy utilization, or supporting increasingly fragile power grids—as seen in Texas. Regulation should consider how Bitcoin mining and chip manufacturing contribute to national security while minimizing environmental impact.
In his speech in Nashville, Trump blamed the Biden administration for targeting bank-crypto relationships. But the real problem is a regulatory and supervisory environment that makes it difficult for banks to safely engage in crypto-related activities. Many banks recognize digital payments and assets will play a key role in the financial system, but they are constrained by unreasonable regulations like Staff Accounting Bulletin No. 121 (SAB 121), which imposes punitive accounting standards and prevents companies from privately discussing exceptions with SEC staff.
Trump also promised to support stablecoins to strengthen dollar dominance. But again, the issue is far more complex. To prevent excessive concentration like in the credit card industry, the U.S. must foster competitive conditions among stablecoin issuers. The dominant use case should not be “dollarization,” as this could undermine capital controls, destabilize emerging economies, and weaken the effectiveness of sanctions. Instead, legislation should ensure stablecoins serve as safe payment instruments enabling instant global transactions.
Achieving this vision requires a robust compliance framework. Today, many stablecoin issuers either do not know or are unwilling to know whether their digital dollars are held by sanctioned countries or criminals—and this dangerous blind spot remains a major barrier to mainstream adoption. Crypto entrepreneurs need to develop innovative solutions to identity and compliance challenges, but progress in these areas has so far been limited. New regulations must strengthen incentives for the private sector to take on this hard work.
In the end, policymakers in Washington must come together to create new rules rather than trying to fit crypto use cases into laws written nearly a century ago. At the same time, the industry itself must address numerous long-ignored issues that traditional financial services and crypto leaders have overlooked. A sound cryptocurrency policy should prioritize builders over speculators. Its potential, much like the early internet, lies in revitalizing industries that have long lacked competition.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
@BlockUnicorn
