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Roula Khalaf, editor-in-chief of the FT, selects her favorite stories in this weekly newsletter.
The writer is president of Coinfund, an investment company focused on crypto assets.
For the crypto industry, the 2024 US elections represented a significant turning point on the path to redemption and legitimacy as an investable asset class. With over 290 pro-crypto members of Congress and a president-elect who has proclaimed the United States to be the crypto capital of the planet, the crypto industry finally finds itself supported, rather than opposed, by the government.
This shift can help the United States strengthen its status as a global leader in technology and innovation as the new Internet powered by blockchains, artificial intelligence and cryptocurrencies takes shape.
But progress is only possible if post-election exuberance is translated into thoughtful policy. First, regulators must immediately change their approach to the markets they regulate.
During the Biden administration’s rule-by-law enforcement regime, agencies — faced with a new asset class that didn’t fit neatly into decades-old regulations — prioritized expansion of their jurisdictional scope.
The fundamental principle – preventing bad actors from doing harm – must remain a fundamental goal. But enforcement actions and lawsuits under Biden have blurred regulatory boundaries, drained agency (and taxpayer) resources, and cost American businesses more than $400 million, according to industry estimates. While regulators bickered, fraudsters perpetrated some of the largest criminal frauds in U.S. history – right under their noses. Market watchdogs don’t need new laws or regulations to stop bad actors. It’s a question of focus and priorities.
To reach its full potential, the crypto industry needs new policies that understand the nuances of decentralized blockchain-based technologies. An overarching principle must prevail: while companies, institutions and their activities must be regulated, the technology itself must not be.
An analogy is the Internet as it exists today. It is not illegal to create a website or app, nor should it be, but how this service is used is governed by law. As Judge Katherine Polk Failla noted in her dismissal of a lawsuit against cryptocurrency exchange Uniswap, to do otherwise would be to try to hold a payment app like Venmo responsible for a drug bust that used the platform to facilitate a transfer of funds.
Clear, transparent and predictable policies, which should include important principles such as the protection and disclosure of client assets, should also be governed by legislation and not regulatory whims. Clarity will unleash a new class of institutions and attract a generation of intrepid entrepreneurs – the lifeblood of our economic future – who will no longer be burdened by the legal risks and personal liabilities of what has been an all-too-uncertain industry .
Public policy support is long overdue. Bitcoin, the original cryptocurrency, which has reached new highs of over $100,000 per digital coin, has emerged from the ashes of the global financial crisis. The crypto industry, over its fifteen-year history, has seen a series of booms and busts. However, along the way, the technology matured with the birth of “smart contracts” which paved the way for new crypto applications, including decentralized finance (DeFi), gaming, social media and even wireless networking. 5G. Today, approximately $200 billion in dollar-pegged stablecoins are already playing an exciting role in expanding the greenback as a global reserve currency. Stablecoin issuers are already among the top 20 holders of Treasuries worldwide.
New standardization and risk reduction are paving the way for accelerated adoption. It couldn’t come soon enough. In traditional financial markets, outdated and outdated infrastructure struggles to handle the load of activity 24 hours a day, seven days a week. However, in crypto markets, public blockchains easily power markets 24 hours a day. 24. As economic inequality continues to impact the global population, the universal accessibility of DeFi opens the door to a more equitable system.
The accelerated development of artificial intelligence will also provide opportunities. The openness, transparency and scale achieved through the integration of crypto and AI could pave the way for responsible innovation. An example is the World app in which Coinfund is an investor. It allows users to prove, anonymously and securely, that they are indeed a human being.
Today, the economic and reputational risks of not having a digital asset strategy now outweigh those of adopting one. With the thoughtful support of policymakers, let’s build the system we deserve together.
