Fred Wilson opined how happy he was with the progress of crypto regulation talks the other day. Fred didn’t realize the sausage wasn’t made yet.
What Democrats like Fred don’t see is that regulation isn’t used to make an industry better or more efficient. It’s used to eliminate competitors, and most importantly to increase government power.
I recall doing legislation when I was on the CME Board. Congress snuck in a transaction tax that had to be eliminated literally in the last minute before it was passed back in 2000.a16z, a huge VC fund, put out a fact sheet on the legislation.
This was good only because 99% of Congress has no idea what crypto even is. Instead, all branches of government pattern matched and tried to force crypto into a corner it doesn’t belong in.
Republican Senator Ted Cruz had it right. Do nothing. Let it breathe.
The Lummis/Wyden/Toomey bill was the compromise bill that should have been passed in the pork-filled infrastructure bill, which is a bad bill anyway.
The US Treasury was having none of that, and neither was Biden. They want more tax dollars wherever they can find them. The damage might be able to be fixed, but lines in the sand have been drawn. Existing crypto markets were up slightly after passage. That should be no surprise.
The most dangerous facets of this bill are the opportunity costs of the bill and the power grab by the government.
The government just increased the cost of working with cryptos. That will decrease competition for legacy analog systems, and for the cryptosystems that have been started up to compete. But what is far far worse is the opportunity costs when you think about innovation that could happen but won’t because the hurdles have just been raised.
One huge opportunity cost is that innovation will not be executed in the United States. The US has the most innovative culture in the history of mankind.
Things happen faster here. Access to capital is better here. The old cowboy mentality that settled the west permeates the tech culture of the US. Crypto benefitted from that culture.
As a person from the financial industry who told Congress that if they did X, things would move offshore, I know the argument well.
In our case, we had a couple of concrete examples and we had existing numbers that showed in accounting terms how much the damage would be. For crypto, it’s all based on optimism and hope.
The offshoring argument is a hard one to drive home to Congresspeople and apparatchiks in the government that don’t understand opportunity costs and have no concept of how to think out of the box.
Who might have an interest in killing crypto outside of banks and financial institutions?
Photo credit: Dave Adamson on Unsplash