Cryptocurrency Flexed Its Lobbying Muscle. Next it Needs a Common-Good Story.
The crypto industry proved its might — now it needs to show its impact, inclusiveness, and responsibility
The Biden White House and Senate negotiators wanted to spend more than a trillion dollars on infrastructure — without increasing taxes. They thought they could raise some of that money by increasing tax enforcement on cryptocurrency — but the burgeoning crypto industry didn’t roll over, and instead proved its growing political might.
With a compromise now reached but not approved by the Senate, the ending to this battle isn’t yet written. But the last two weeks saw successful mobilization of 80,000 voters by groups like the Blockchain Association, Fight for the Future, and Coin Center; Senators learning about the thousands of crypto ecosystem participants; lobbying engagement by CEOs and investors; and elected leadership by Sens. Ron Wyden, Cynthia Lummis, and Pat Toomey.
The battle will leave an impression with policymakers — that the crypto industry will never again be an easy political target. As a veteran of lobbying battles like PIPA-SOPA — where Internet companies successfully mobilized millions of voters against overbroad intellectual property proposals — I’ve seen how these emergency-mobilization moments can end up sending a lasting signal to policymakers.
But few in the crypto industry are likely patting themselves on the back. The political spotlight on crypto over the past week has shown crypto’s political strength — as well as its political to-do list.
If crypto leaders are going to increase policymaker understanding of their industry, and expand their ranks of political support, they will need to tell a clearer story of how cryptocurrency advances the common good. They’ll have to show the impact, inclusiveness, and responsibility of the cryptocurrency industry.
Here’s how they can build on their big win to do that.
Crypto’s Common-Good Story
First, they can tell a “cryptocurrency for dummies” story to Washington. Like any sector, crypto is full of jargon like “miners,” “ethereum,” and “nodes.” But President Biden echoes a lot of politicians when he insists that his staff explain things in plain language. Crypto needs to explain itself so that “Scranton voters” or the Boomer generation, can understand it.
And for all the excitement around decentralization, it’s not currently clear to the average consumer (and therefore to their elected representatives) why they should care strongly about crypto. Senators are now more aware that a lot of their constituents are involved in crypto — but the next step is showing Senators why the rest of their constituents should care.
Second, the crypto industry needs a social-good story. Crypto is cool, decentralized, and somewhat countercultural. But to expand its political appeal, policymakers will benefit from hearing whether cryptocurrency improves financial security and reliability; counters discrimination in mainstream finance; or generating returns that help people do good things for their neighborhoods.
Third, the crypto industry must show how it’s tackling bad guys. Do a small slice of people use cryptocurrency to do illicit things? Sure — just as they do with traditional currency. Like other forms of technology including social networking or encrypted messaging, crypto is used in legitimate ways by most people most of the time. But it would be powerful if crypto industry leaders could quantify the misuse, show that it’s cracking down on abusers, and say credibly (for example) that 99% of all transactions are for legitimate uses.
Taxation Breeds Acceptance
Fourth, the crypto industry should embrace taxation as a path to political acceptance. During the debate of the last two weeks, many crypto figures said they were willing to be taxed as necessary — but the question of how to properly tax different crypto players will linger.
Early in the Internet’s history, Sen. Wyden helped write the Internet Tax Freedom Act of 1998, barring governments from taxing Internet access. Wyden argued that Congress shouldn’t saddle nascent technologies with old frameworks — a similar argument that crypto advocates made last week.
Unfortunately, most members of Congress are no longer inclined to treat new tech as exceptional. This is the case even for crypto — even though many of the small projects are aiming to provide alternatives to big platforms.
Policymakers learned from the rise of the Internet that an industry considered cute in its infancy could soon become formidable. Crypto leaders will be wise to embrace a durable taxation framework, which will only deepen crypto’s political standing (and therefore harder to single out politically).
Finally, for all the reasons above, the crypto industry needs to expand its base of support among Democrats. With the notable exception of Wyden, many Democrats including SEC Chair Gary Gensler, Treasury Secretary Janet Yellen, and Sen. Elizabeth Warren are among crypto’s most vocal critics.
The good news is that most rank and file elected Democrats don’t know enough about crypto to have a solid opinion either way. That leaves a massive opportunity for the industry to educate congressional Democrats about how crypto helps their constituents. One crypto co-founder had a good suggestion:
Crypto industry organizations proved last week that they are a force to be reckoned with — that’s a great foundation. Steve Jobs once said that it’s “better to be a pirate than to join the Navy” — and crypto’s disruptor mentality has gotten the industry this far.
But policymakers are long past the point of giving new technologies political deference. In order to reach greater acceptance, the crypto industry’s next step will be to build on its win to tell its common-good story. The Senate debate has provided the road map.