cryptocurrency

Government officials in Congress and at independent agencies like the CFTC should focus on protecting consumers and ignore any entreaties from their former colleagues who now represent the industry’s interests.

Better still, the government could consider more aggressive action. Application of existing law would bring some stability to the stablecoin space, but there is one more simple and effective option: banning them outright. Stablecoins are an essential component of a deeply fraudulent industry that is financially and environmentally destructive. Guaranteeing their existence is an unnecessary risk.

In another notable swing through the revolving door between government and BigLaw, two top Securities and Exchange Commission enforcement officials recently joined Willkie Farr & Gallagher LLP as partners. They join former SEC general counsel Robert Stebbins and former CFTC commissioner Christopher Giancarlo as government alumni at the firm. 

A leading voice in this push is Sam Bankman-Fried, 30-year-old CEO of crypto trading exchange FTX. Christened by some as a crypto prince and others as Washington’s aspiring kingmaker, Bankman-Fried has in the past year developed an extensive crypto policy agenda that entails revolving-door hiring of former CFTC officials, formation of super PACs, and congressional campaign donations.

Crypto’s ongoing blitz of advertisements that package speculation and fear of missing out (FOMO) in glittering terms is a danger to consumers all over the world. Below is a list of resources that will help the public see beyond the marketing hype and garner a true understanding of crypto assets and the industry at large. 

Over a decade after the financial crisis, few would still dispute that the revolving door between financial regulators and the financial industry helped pave the way for economic disaster. In the years preceding the crash, regulators who came from the country’s largest banks and planned to promptly return to them, removed regulatory restraints and turned a blind eye to the predictably dangerous effects (see, e.g. Robert Rubin and Alan Greenspan). In the next administration, different regulators drawn from the same well let the fraudsters off the hook and left the working people who had fallen victim to them out to dry.  

Fortunately, Biden has the means to stop at least one aspect of crypto’s campaign in its tracks. Through an executive order, he can cut off crypto’s access to the revolving door by barring the officials who are involved in developing regulations for the digital assets industry from working for it for at least four years. By rights, it should be a bare-minimum anti-corruption standard.

While it is unlikely that an economy as large as Russia’s can be rerouted through present crypto infrastructure, there remains opportunity for targeted individuals and entities to leverage the industry’s weak compliance mechanisms to move some of their assets. The Treasury Department’s Office of Foreign Asset Control (OFAC) and Financial Crimes Enforcement Network (FINCEN), in conjunction with the White House’s National Security Council, need to ensure this does not happen. 

Interagency cooperation is essential to ensuring the Biden administration adequately manages the risks associated with the growth of cryptocurrency, including illicit finance, tax evasion, investor and customer protection, shadow banking, and financial stability.