GuShiio.com The crypto industry has always been on the boundary between innovation and scams, and regulators need to truly clarify what kind of industry they want to support.
Source: Politico
Compiled and organized by: BitpushNews Tracy
The crypto industry has reached its peak in Washington. Litigation dissipated, a group of lawmakers with industry support settled in Congress, and the White House welcomed a senior official specializing in digital assets. However, the encryption industry may now become its biggest enemy. Due to strategic, commercial and ideological differences, fierce infighting is taking place within the industry.
Nic Carter, a partner at Castle Island Ventures, bluntly described the crypto community: “They hate each other.” But he added: “However, they hate the outside world more.”
After years of negotiations, hopes for crypto-friendly legislation to pass Congress have soared, and many leading companies are pushing for regulatory frameworks that are more consistent with the characteristics of digital assets. Logically speaking, under this optimism, promoting legislation should come naturally.
But now, I am beginning to wonder which bill can actually be implemented.
Even the least controversial stablecoin bill-the regulatory framework for private digital currencies pegged to the dollar-is now embroiled in disputes within the crypto industry.
Tether, led by Paolo Ardoino, is the world’s largest issuer of stablecoins. He posted on X that the draft legislation is a means by competitors to “kill Tether.” Richard Grenell, a former senior diplomat in the Trump administration, seemed to agree. He wrote in a post: “Certain crypto companies are again manipulating systems in an attempt to eliminate competition.”
Chris Pavlovski, CEO of Trump ally and video streaming platform Rumble (which works with Tether), also posted on X, saying he suspected the “toxic stablecoin legislation” was undermining market confidence in the crypto industry.
“Who is driving this pile of garbage?” He added.
You know, this should have been the easiest bill to pass.
In fact, despite the growing influence of the crypto industry, it remains a highly divided industry with complex internal interests and even more difficult to coordinate than traditional finance. In addition to basic market competition, there are also huge differences within the encryption industry on the future development direction of digital assets and related technology paths.
For Washington,”supporting encryption” is far from as simple as imagined.
But for the encryption industry, it is more about survival. The industry has long been labeled as a playground for speculators and money launderers. Now it has reached a critical moment in redefining itself and shaping political influence-provided that industry leaders are willing to promote more than just higher currency prices.
For now, the Trump administration seems to be still figuring out how to deal with the crypto industry. According to people familiar with the matter, the White House’s Cryptocurrency Advisory Committee has not yet been formally established, and the current plan is to first hold a series of summit discussions with the industry.
The first summit is scheduled to be held this Friday.
When I mentioned the divisions within the crypto industry to Paul Grewal, Coinbase’s chief legal officer, he admitted: “This is an all-encompassing area.”
“There are a lot of different people in the industry, and we don’t always agree entirely.” he said.
In fact, the word “cryptocurrency” itself implies a contradiction.
Digital assets such as Bitcoin were originally conceived as currencies, and their application in the payment field remains the core argument supporting their long-term value. However, especially in the United States, the mainstream perception of cryptocurrencies is more inclined towards investment tools, and the core goal of the market is often to drive prices up.
But if the value of a currency fluctuates violently, it is difficult for it to be widely used in actual payments. In other words, cryptocurrencies want to be both a serious monetary system and a gold mine for speculative markets, which are difficult to be compatible with. Currently, the vast majority of crypto payments are made through stablecoins, which are essentially supplements to government fiat currencies rather than real competitors.
Another contradiction is that Bitcoin’s core selling point is decentralization, making transactions no longer dependent on traditional financial institutions such as banks. However, the development of the crypto industry relies on centralized platforms, such as exchanges such as Coinbase and Binance, to serve as the core infrastructure for market transactions. This creates a natural split between decentralized ideals and centralized reality.
In addition, the legitimacy and recognition of different cryptographic assets are also the focus of internal disputes in the industry. Especially this week, Trump posted in support of the establishment of a “strategic crypto reserve” in the hope of hoarding certain specific tokens, triggering a new round of discussions.
The crypto industry has always been on the boundary between innovation and scams, and regulators need to truly clarify what kind of industry they want to support.
Washington’s long-term focus on the crypto industry has focused on consumer protection and prevention of illegal financial activity. At the same time, policymakers also hope to promote the development of underlying technologies to further improve financial efficiency and promote new innovations.
However, it cannot be ignored that the government’s policy choices will directly affect the future development of the encryption industry. Therefore, policymakers need to be cautious when developing regulatory frameworks to avoid unintended consequences.
This also puts the focus on stablecoins, as any relevant legislation will affect both the crypto market and the global status of the U.S. dollar.
Currently, bills proposed in both houses of the U.S. Congress aim to strengthen supervision of issuers of stablecoins, requiring these tokens to be backed by highly secure assets to ensure that they can be converted into U.S. dollars at face value at any time. The core goal of this measure is to prevent credit risk on digital assets that should be anchored to the US dollar.
“The use of stablecoins has increased in part because other countries want to store U.S. dollar assets through it.” “Therefore, we need to establish a regulatory framework that can give these stablecoins credibility,” said Nellie Liang, former undersecretary for domestic financial affairs at the Treasury Department under the Biden administration.
The current legislative direction may favor U.S. domestic stablecoin issuers such as Circle, but it may also restrict Tether’s operations in the U.S. market-one of the core controversies behind the bill.
Tether has close ties to Cantor Fitzgerald, former U.S. Commerce Secretary Howard Lutnick, but has long faced doubts in the United States, with regulators questioning the transparency and compliance of its reserve assets. To this end, Tether has recently begun to strengthen transparency and announced on Monday that it is advancing a comprehensive financial audit in response to market concerns about its reserves and stability.
However, Tether may still be difficult to incorporate into the upcoming legislative framework. Its reserve assets include not only ultra-safe cash and U.S. Treasuries, but also a wider range of asset classes. In addition, if Tether is to be subject to U.S. regulation, it will have to establish an entity in the United States, which could be a major obstacle for Salvador-based companies.
According to a report by TRM Labs, Tether was involved in $19.3 billion in illegal financial transactions in 2023, far exceeding its competitors.
Dante Disparte, Circle’s director of public policy, did not comment directly on Tether in the interview, but he hinted at tensions within the industry and described Circle as a “fully reserved and highly transparent stablecoin operator.” This seems to be in sharp contrast to Tether.
He also said that the “space race for digital currencies” will be won by digital dollars that comply with U.S. laws, and not all stablecoins currently meet this requirement.
George Selgin, an economist at the liberal think tank Cato Institute, likened stablecoins that lack clear regulation to underground distilled liquor during Prohibition-unknown ingredients, unpredictable risks, and full of uncertainty.
But for the entire crypto industry, the real question is: What kind of stablecoins can be regarded as a “quality product”? At present, it is clear that there is still no consensus within the industry.
