- The Treasury wants to introduce a centralized digital coin, called stablecoin, which will be pinned to the U.S. dollar at a rate of 1:1.
- Biden administration is looking to levy taxes against digital currencies.
- Crypto responsible for large crop of new lobbyists, many coming from former government positions.
In the latest signal of the Biden administration’s intent to enter and regulate the crypto currency market, Treasury Department officials on Thursday introduced a plan to implement a new, centralized digital currency, stablecoin, which will represent the U.S. dollar digitally at a rate of 1:1.
A primary selling point of crypto currencies has always been their lack of regulation and freedom of use. But the federal government does not seem to agree.
The administration announced its intent to tax digital currencies in August, expecting to extract up to $28 billion in revenue to fund projects allotted in the infrastructure bill. stablecoin will serve as a means to integrate crypto markets with more traditional forms of finance.
In response, large amounts of lobbyists have cropped up in Washington. The army of lobbying personnel focused on crypto has grown substantially in the last few years. In 2020, over $2.8 million was spent lobbying in Washington by crypto firms. That number is expected to double this year, already having reached $2.4 million in the effort to fight regulation.
But these agencies don’t rely solely on muscle or money, they have been swift to include important and connected names among their ranks.
Just recently, the newly formed Crypto Council for Innovation, created by Coinbase, Fidelity, Square, and Paradigm enlisted the help of K-street lobbying firm, Brownstein Hyatt Farber Schreck, to aid in the fight against tax regulation in digital markets. Among their team are Travis Norton, a former Senate Banking aide to Sen. Tim Scott (R-SC), Al Mottur, a former Senate Commerce aide, Brian McGuire, a former Treasury official and chief of staff to then-Sen. Majority Leader Mitch McConnell, and Elizabeth Maier, a former staffer of Sen. Jon Kyl (R-AZ).
The single highest spender on lobbying in this field is a crypto firm called Ripple Labs which has spent $550,000 this year alone. In May, it hired former U.S. Treasurer, Rosa Rios. Other former government hires to top crypto agencies include Faryar Shirzad, a former White House National Security Council staffer and former Goldman Sachs official for government affairs who now works for Coinbase.
Max Baucus, who chaired the Senate Finance committee until 2014 and then became ambassador to China under the Obama administration, has served since March of this year as a government advisor to Binance, a crypto currency exchange formerly out of China that is currently the world’s largest by volume of trade. Last year, Binance pushed for the removal of U.S. users from its platform.
The former senator will “play a key role consulting and liaising with U.S. regulators and authorities on decisive policies that affect the larger global industry and best practices to further guide sustainable developments for Binance and the broader cryptocurrency ecosystem.”
Crypto currencies have grown at astronomical rates over the past several years. From 2009, when digital currencies, beginning with Bitcoin, first began to hit the market to now, with around 6,500 crypto coins in circulation, the market has exploded to a valuation of close to $2 trillion. But, how protected and how stable these currencies are have remained points of contention for investors and lawmakers alike.
Not everyone is as bullish.
SEC chair, Gary Gensler, a former MIT professor who taught classes on crypto currencies, has raised the point that this brand of currency is expected to be short lived and is riddled with scam and fraud. He likened the digital market to “the Wild West” and the coins themselves to “poker chips at the casino” during a speech in August, raising the question of whether the federal government should adopt digital currency in this way.
China has already made attempts to centralize a digital currency, hoping to reap the benefit of the value stored there. The U.S. government sees that as a potential threat.