To lead on digital asset regulation, first the U.S. needs to follow

Last week, SALT and Investopia wrapped up an epic, two-day event in Abu Dhabi convening over 2,500 policymakers, investors, managers, academics and founders. During the conference and in conversations with people like UAE Minister of Economy H.E. Abdulla Bin Touq Al Marri, I found myself inspired yet again by the country’s commitment to fostering innovation via a clear regulatory rubric, especially in financial technology.?

And as I survey the regulatory landscape here at home, I think one thing is abundantly clear: if the US wants to lead in innovation, it will need to start with some imitation.?

If the federal government wants to get this country anywhere near the forefront of innovation in blockchain, crypto and other digital assets, it needs to see that piecemeal regulation hacked together by multiple agencies fighting for pole position is not going to cut it.?

You might be thinking, “Why be at the forefront of a hype-only industry currently in the midst of one of the biggest cases of fraud in our lifetime?”??

Because, like it or not, there’s an ever-growing crowd of entrepreneurs, developers, retail investors and large institutions stampeding to find exciting use cases for blockchain and get exposure to digital assets in their portfolios.?

(A partial list of those large institutions: Wells Fargo, Citigroup, Bank of America, Goldman Sachs, Morgan Stanley, Fidelity, JPMorgan, BNY Mellon, Mastercard, PayPal, Visa, Walmart, Google, BlackRock, Estée Lauder, Franklin Templeton, IBM and Oracle. My own firm, SkyBridge Capital , has been investing in cryptocurrencies and companies in this industry for years—and just announced a partnership with blockchain software and services provider Prove AI .)?

And that crowd needs leadership from the front.?

More importantly, as other governments iterate and improve, the US will risk giving up its standing as the undisputed financial capital and innovation hub of the world if it stays stuck in the mud.?

Just look at the latest report on global crypto regulation from 普华永道 : countries like Switzerland, the UAE, Singapore, and Japan have comprehensive regulatory frameworks for digital assets in place—many of them for years now—while the US doesn’t.?

You don’t even have to look beyond our borders. Just look at some of the 50 states, those great laboratories of democracy.?

In 2019, Wyoming extended bank charters to those dealing with digital assets. Colorado’s Department of Revenue even accepts crypto as an additional form of payment.??

It’s not just crypto-friendly regulation; New York created a bespoke license, BitLicense, back in 2014 that’s required for anyone conducting virtual currency business. It’s been criticized by many in the crypto industry, but it’s another experiment the federal government can and should learn from.??

I’m not saying all this just to accuse. Well, I’m accusing a little. But I mostly want to encourage. The US government should look to other jurisdictions, at home and abroad, to see what works and what doesn’t. After all, some of these regulatory frameworks have been in place for years and been updated many times; there’s plenty to glean from.?

If the US government does this—acknowledges that proper digital assets regulation is as important as the wheel, and also doesn’t need to be reinvented—it will help us answer a key question:?

What’s what, and who’s on first??

A massive, fundamental problem with the state of regulation in the US is that nobody knows who the primary regulator is. That’s partly because we haven’t defined which digital assets are what in the first place. Gary Gensler says that everything but Bitcoin is a security, so the SEC should regulate it all, the CFTC calls virtual currencies commodities, the IRS collects taxes on the basis that these assets are property, other agencies in the mix include the Federal Reserve, the Treasury Department, FinCEN, the OCC, the FDIC, the FTC, and the CFPB… and now you’ve got a headache.?

With new types of digital assets emerging every day and no way to categorize them, this problem isn’t going away anytime soon. Meanwhile, the would-be innovators get scared off by the massive fees they need to pay crypto lawyers just to sort through this mess, the well-meaning step on landmines left and right, and the savvy use regulatory arbitrage to cut corners.??

There are plenty of examples to learn from elsewhere. In the EU, the Markets in Crypto-Assets (MiCA) framework will—among many other things—bring the asset class under the joint supervision of the European Banking Authority and the European Securities and Markets Authority. In Southeast Asia, the Monetary Authority of Singapore was handed the keys.?

From there, I’ve got a long wish-list. It includes public-private partnerships. I would love to see the US invest in innovation the way that Abu Dhabi did with its $2B initiative to back blockchain and Web3 startups. It also includes US leadership in governance, not just tech innovation. I would love to see the US government take the lead in harmonizing international rules and regulations so that there’s more consistency and cooperation across the globe.?

I’m confident we’ll get there eventually. Right now, we just need a little humility, a little nudge, and a little step forward.?