Last month marked a significant milestone in the race for Central Bank Digital Currencies (CBDC) dominance, with the Chinese Ministry of Commerce releasing a video demonstrating CBDC application in practice. In a statement put out by the ministry shortly after, it outlined how it intends to take a staggered approach in launching its digital currency program. Now U.S. regulators in Washington have begun sounding out support for the next level of crypto innovations. The Federal Reserve Bank of Boston, one of twelve regional Federal Reserve banks operating under the U.S. central bank, is in the process of evaluating more than 30 different blockchain networks to determine if they would support a digital dollar, in order for it to compete on the frontlines among central banks all over the world.
Recently, the U.S Office of the Comptroller of the Currency (OCC) cleared banks to provide custody services for crypto assets, a move that intends to bridge the gap between the crypto space and the traditional financial sector. Although the United States cannot rightfully proclaim itself as a trendsetter that embraces the notion of crypto mass adoption, the Commodity Futures Trading Commission (CFTC) actually had its eye fixed on crypto assets as early as 2014 to closely monitor its development. Other regulatory organizations have paid increasing attention to crypto since the 2017 bull run, if not earlier.
Politicians, who tend to be more cautious when it comes to controversial issues, seem to lead the charge on the crypto adoption front. There are politician forerunners who started their crypto experience in 2013. The perks of opting for crypto contributions are obvious: they are relatively secure and traceable, with rules clearly spelled out. The Federal Election Commission (FEC) outlined regulatory guidance on campaign related contributions in May 2014, allowing Political Action Committee (PACs) to accept small dollar amounts of cryptocurrency three years before the price of Bitcoin actually took off. The FEC also requires information disclosure on the receipt of the contribution and pinpoint the exact process of valuation to mitigate foul play.
The trend was first led by Republican Andrew Hemingway, a tech-entrepreneur-turned politician, in 2014. At the age of 32, he successfully established two new records, by being the youngest gubernatorial candidate in New Hampshire history, and the first to accept bitcoin contributions. He claimed that this initiative was the natural response to the overwhelming demand, as “New Hampshire boasted more ‘Bitcoin Billionaires’ than any other states in the country”. About 20 percent of Hemingway’s total political contributions came from Bitcoin. Even though he lost his bid for governor, he set off a trend that a long line of politicians have since followed. For instance, New York Democrat Patrick Nelson accepted bitcoin donations through crypto payment service provider Bitpay for his campaigns in 2018.
Other candidates who are strong crypto advocates include former U.S. Representative Cynthia Lummis, who recently won her primary race to be the Republican nominee for the U.S. Senate representing Wyoming. She bought her first bitcoin in 2013. The chairman of the National Republican Congressional Committee, Tom Emmer, revealed that he would accept bitcoin donations for his re-election campaign. He started looking into bitcoin four years ago. These are hardly the only prominent figures who are championing the cause of crypto mass adoption.
Though the Democratic presidential candidate Joe Biden has never explicitly expressed his stance on Bitcoin in public, his actions provide hints as to what a Biden presidency might mean for the crypto space. Biden is known to be a huge tech advocate. Though he does not accept bitcoin donations at present, he was nudged by a political action committee to take bitcoin donations in the 2016 election, citing, “this is in keeping with Vice President Biden’s strong support of technology and innovation throughout his career.”
However, not all regulators or politicians are moving at the same speed in adopting bitcoin as a viable method of payment. There are always people who are more cautious when it comes to navigating uncharted waters. Jay Clayton, the chairperson of the Securities and Exchange Commision (SEC), has gained a reputation of being openly critical about crypto. His skepticism has shaped several “measured” regulatory stances that have somewhat thwarted the rapid adoption of crypto and the underlying blockchain technology. However, as Clayton was nominated as the next federal prosecutor in Manhattan in June, the SEC may welcome a friend of the crypto community as its next chairperson.
The person in question is Hester Peirce, who was dubbed “Crypto Mom” for her public dissent on the SEC decision to reject the Winklevoss’ Bitcoin ETF application. She is also celebrated in the crypto community for her efforts to extend the grace period for crypto projects to become sufficiently decentralized in order to pass the Howey Test, among other things. You don’t have to know her full accolades by heart, the nickname alone suggests her influence and popularity among crypto enthusiasts. Being the most senior Republican commissioner on the board, she is the most likely successor to Clayton’s post.
Although still very much a speculative scenario, “Crypto Mom” as SEC’s acting chair is a moment worth looking forward to for the crypto community. The CFTC and OCC are both chaired by crypto-friendly regulators. If Hester Peirce were to become the acting chairperson of SEC, all major U.S. financial watchdogs would be poised to embrace disruptive changes engendered by blockchain technology. The crypto space would benefit from adding another friendly face.