Update from Washington

Opens from Washington DC away from Colorado and Wyoming, noting the regulatory environment has changed and both the executive and legislative branches now want to change how crypto is regulated.

He brought a delegation to DC for a week meeting lobbying and advocacy groups, congressional and Senate staff, and CFTC members, and will highlight three efforts with influence over the regulatory future.

The first is HR 7614, the Digital Commodities Exchange Act, which changes how ICOs and token trading are handled, pushing sufficiently-decentralized cryptocurrencies toward commodity rather than security treatment and simplifying exchange standards.

HR 7614 is unlikely to pass as-is but sparks a valuable conversation about digital-commodity pre-sales, insider trading, and information asymmetries.

The second is the Senate's Lummis-Gillibrand bill, over 140 pages, announced around June 7th before Consensus, covering taxes, self-regulatory organizations, and sufficiently-decentralized, with its first bipartisan traction but needing four committees.

The third is the Biden executive order calling for a unified executive-branch approach with a first report due in June, and expects the three efforts to collide into some compromise agreement.

Says when staff asked his position, he argues the industry needs three things, the first being that it lacks any coherent definition of decentralization while 8000-plus projects make unaccountable decentralization claims.

Unaccountable decentralization claims imply consumer-protection and market-structure properties people invest on, so the industry must work with policymakers to measure decentralization, and IO is setting up the Edinburgh Decentralization Index lab at the University of Edinburgh.

The index would measure the top 15 to 20 projects on an explicit scale relative to Bitcoin, giving a basis to codify sufficiently-decentralized into regulation.

The second need is a consumer bill of rights, since crypto works on a promissory estoppel like the implicit trust that an open-source author will not retroactively revoke the license and demand a royalty.

Consumer protection is hard because users want unlimited implicit protection when things go wrong while profiting developers must ensure the protocol behaves, so he wants user rights codified into the system via a constitutional process plus legislation on privacy and software quality.

The third need is transnational cooperation, since what happens in Dubai, Singapore, and Switzerland matters as much as Washington, citing the Wolfsberg Principles for KYC and AML as a model for universal private standards.

Dozens of actors are in DC, some permanently and some drawn by the Luna collapse, with some firms aggressively hiring lobbyists and PACs while others invest in education, and lawmakers seeming genuinely willing to learn.

Acknowledges the legislative process is often ineffective and bureaucratic, applying surface cures, but says the industry commanded a 2-trillion-dollar valuation and creates high-paying jobs, so there is universal incentive to get it done.

Clarifies he runs a private company and does not speak for the Cardano protocol or foundation, but will keep engaging bodies like the DCC and Blockchain Association and commenting on bill drafts.

His company will explore emerging tech for regulation like machine-understandable laws and algorithmic regulation, and that Cardano's metadata standard and Atala Prism can create compliance-adhering rich identities as optional, user-chosen tools.

Hundreds of real regulated use cases already exist, from security token offerings to regulated DeFi to banks adopting the protocol while keeping their charters.

The knowledge gap among lawmakers is significant since too many associate crypto only with CoinMarketCap and token value, missing that the least interesting part of blockchain is the token price.

Predicts that over the next six to 12 months stablecoins, especially asset-backed ones, will see the most regulation, with an open debate over algorithmic stablecoins.

Argues an asset-backed stablecoin with a central issuer deriving value from promises feels more like a bank than a decentralized protocol so it warrants oversight, unlike a fully-custodied Bitcoin- or ADA-backed token.

Predicts a 2022 change of government creating divided government, which is either an opportunity for compromise and comprehensive reform or an exacerbation of divisions, and says they have plans for both.

Cardano's strength is hanging together and showing its work through governance experiments, and that participants are building a digital government as much as a protocol, open to the willing not the privileged.

Closes with a disappointing discovery that some in the Bitcoin community are actively lobbying lawmakers to write into law that everything but Bitcoin is a security and to ban proof-of-stake cryptocurrencies.

Co-opting the federal government to ban competition is anathema to Bitcoin's libertarian free-market founding and is the behavior of multinational banks, adding he saw the emails and knows who they are.

The Luna collapse losing tens of billions with no consequences invites heavy damaging regulation, and that maximalists trying to encode their principles into US law shows the industry's immaturity.

He will work with any crypto leader who calls, since together the industry commands trillions and a strong voice, but fighting each other only hands it to legacy actors who will never give it back.