Regulatory risk has always been high on the agenda for bitcoin investors as statements by regulators and lawmakers about the digital currency have historically been major price drivers. Furthermore, due to bitcoin’s decentralized and pseudo-anonymous nature as well as its early associations with dark web marketplaces, many bitcoin holders have feared that governments could attempt to ban the use of cryptocurrencies. Fortunately, in the vast majority of countries that never took place.
Currently, legislators around the world are still in the process of formulating what a global regulatory framework for cryptographic assets and blockchain technology could look like. This has created an opportunity for crypto lobbyists to move in and influence how new crypto laws evolve.
Coinbase launches political action committee
In July, San Francisco-based cryptocurrency exchange Coinbase launched its political action committee (PAC), presumably to “lobby for bitcoin” on Capitol Hill. A PAC is an organization that raises and spends money for a political campaign. PACs tend to support labor, business or ideological interests, which means they can be used to engage in activities for or against specific legislation or a political candidate.
There are two types of PACs: connected PACs and non-connected PACs. Connected PACs have an affiliation with a specific interest group while non-connected PACs are set up to lobby for one specific issue. Interestingly, this is not Coinbase’s first involvement with a PAC according to CNN. In 2014, the company donated $3,000 to a PAC named Bit PAC. The company has made no statements as to the intentions of its newly-launched PAC.
Bitcoin lobbyists on Capitol Hill
Coinbase’s new PAC is not the only lobbying group on Capitol Hill that is vying for crypto-positive laws to be written into legislation. In 2014, the Bitcoin Foundation hired Washington, DC-based firm Thorsen French Advocacy with the intention of informing lawmakers about the benefits of decentralized digital currencies.
“When governments are properly informed about bitcoin’s promise, the technology’s social and economic benefits are recognized and its rapid innovation and adoption will increase,” said Bitcoin Foundation’s execute director at the time, Jon Matonis, in a statement. In a press conference, the Bitcoin Foundation stated that Thorsen French Advocacy would act as a bridge between the cryptocurrency ecosystem and Congress.
“The goal is to clear the decks, clear the way, so that the bitcoin community, businesses and people can build the services, expand out to more and more people the world over, and really deliver on the benefits that bitcoin promises,” said the Bitcoin Foundation’s global policy council, Jim Harper. In the same year, co-founder of crypto investment funds Falcon Global Capital, Brett Stapper, reportedly filed paperwork to lobby for cryptocurrencies on Capitol Hill.
“Our main concern is that our elected officials will pass regulations without being fully educated on the topic which could have a negative impact on the Bitcoin ecosystem,” Stapper told Business Insider. “Our goal is to educate these elected officials and to offer them guidance on how to accept Bitcoin contributions. If we can be successful with these efforts, we feel the Bitcoin ecosystem could be greatly impacted.”
In 2017, David Schweikert, a Republican from Arizona, and Jared Polis, a Democrat from Colorado, set up a bipartisan lobbying group called the Congressional Blockchain Caucus, which aims to educate and engage with lawmakers to help the formation of a smart regulatory approach to blockchain-based technologies.
“Lawmakers need to understand that as the world rapidly changes, it’s our responsibility to ensure that we craft policies and adapt laws that match our ingenuity. Blockchain’s potential to reshape everything from the financial industry, to supply chains, to cybersecurity, to health care is something we should embrace,” said Polis.
“Open blockchain networks and distributed ledger technologies are still new, but it’s critical for members of Congress to begin comprehending both their current applications and future use cases. It is critically important the United States remain competitive regarding emerging technologies, and distributed ledger technology is the open, secure, efficient technology backbone we’ve been looking for,” Schweikert added.
Will cryptocurrency lobbyists help shape regulations?
Currently, cryptocurrency regulation has largely been in the domain of the S.E.C and the C.F.T.C. while lawmakers have primarily been focused on collecting information and opinions about the industry before passing federal legislation.
This became apparent during the U.S. Senate Banking Committee hearing covering digital currencies at the beginning of the year titled “Virtual Currencies: The Oversight Role of the U.S. Securities and Exchange Commission and the U.S. Commodity Futures Trading Commission” when policymakers questioned representatives of the S.E.C and the C.F.T.C about their views on the opportunities and threats of cryptocurrencies for the U.S. economy. This would suggest that – at least for the time being – policymakers are happy to wait and see how the cryptocurrency ecosystem evolves and leave the regulation up to financial regulatory bodies.
On a state level, however, some blockchain and cryptocurrency legislation has already been passed, and the crypto-friendliness varies greatly from state to state. Nevada, for example, has passed a bill that bans blockchain taxes while Arizona and Tennessee legally recognize smart contracts. Conversely, in Hawaii businesses are prohibited from transmitting bitcoins while in West Virginia the use of digital currencies has been banned.
This would suggest that concerted efforts of reaching out to lawmakers and educating them on the benefits of cryptocurrencies and blockchain technology for the economy and society at large could bear fruit in the future.