DC Fintech Week and the Path to Crypto Regulation

Neither this post nor any other on cryptofal.com should be taken as financial advice. It is not.

Early this week, Washington D.C. hosted its 6th annual Fintech Week to highlight the conversation on financial technology and policy.  The conference included a series of panel discussions with speakers from government, private, and academic backgrounds.  The most notable guests included Acting Comptroller of the OCC Michael J Hsu, CEO of IOHK Charles Hoskinson, Director of the NCET Eun Young Choi, CFTC Chairman Rostin Behnam, European Commissioner for Financial Stability Mairead McGuinness, and FTX CEO Sam Bankman-Fried. Although the spectrum of the discussions were varied, the focus for many was centered on cryptocurrencies and its future as a part of the financial sector.

One of the more interesting analogies came from Comptroller Hsu.  He referenced the concept of skeuomorphism and how it served Apple when creating a user-friendly interface for their touchscreen phone.  The design provided enough likeness with real world items that the learning curve was gentle, subsequently “paving a path for rapid adoption” for Apple's products.  To that end, he argued that much of the crypto industry sought to do similar by mimicking the language and operability of traditional finance as a pathway for mass adoption.     

The major barrier between crypto, DeFi, and blockchain based assets and mass adoption lay in packaging up the chaotic and lawless industry into a regulated and user-friendly system. The essential question for the leaders of this fledgling industry is about intention and then accessibility.  It’s obvious the intention is to make crypto and digital assets widely adopted.  The greater the audience the larger the industry grows and increases in worth and utility.  To be omnipresent, access must be easy, hence the skeuomorphic design.  The final element lies in safeguarding those assets, and that is impossible without government involvement.   Building an entire framework to support these ambitions will require legal definition especially if companies mean to achieve legitimacy on the scale discussed.  While defining and regulating the industry in one country will not guarantee true for another, the U.S. remains an influential figure for financial policy.  Whatever laws are passed in the U.S. will likely manifest similarly overseas.       

This is not to say that attempts to regulate cryptocurrencies haven't been made.  Over the past few years, many bills have been introduced on Capitol Hill and none have made it to the floor for a vote.  With November elections approaching, the likelihood of any being passed before the year is out is extremely low. The bills with the most promise are held up in committees largely because congress has little understanding of digital assets and blockchain technology.  This ignorance leaves policymakers stuck on how to define, let alone attempt to regulate, the myriad of existing assets.  

The increasing delay on crypto bills and regulation places pressure on the industry but it presents some unique opportunities to help shape the development legal framework as well.  The objective of conferences like Fintech Week is open a dialogue between the leading figures from a variety of fields and backgrounds.  It’s too rare that government officials, industry leaders, and intellectuals engage with one another.  To build an optimal regulatory framework, it will take the aid of all who have knowledge of the bigger picture.  It will also require the industry to come to terms with some hard truths over where its failures and weak links lie.