Insiders, Outsiders And Experimenters, Revisited

Opinion by: Zack Kelman

Five years ago, during our last Global Taxonomy of Crypto Policy, global banking insiders at the International Monetary Fund unveiled a strict new regulatory framework as the US president publicly (if skeptically) addressed crypto for the first time. 

Outsiders began sporadically banning Bitcoin (BTC), and exchanges relocated to offshore experimenters like Malta as crypto became irreversibly intertwined with global politics. 

Since then, crypto’s entanglement with global politics has only deepened. This year alone, America dismantled four years of anti-crypto policy, inaugurated a president who campaigned on crypto — even creating his memecoin and with plans for a utility token to fuel his social media site — and passed landmark bipartisan stablecoin legislation. In just half a decade, crypto moved from relative obscurity to political hell and back, especially in America.

How did this happen? The short answer is politics.

America’s political crypto shift

For decades, the US leveraged stringent anti-crypto regulations, especially the Financial Action Task Force’s Travel Rule — forcing crypto firms to Know Your Customer (KYC) clients — to preserve its correspondent banking and dollar-clearing monopoly. But US policy shifted as Americans adopted crypto, and dollar-backed stablecoins reinforced dollar dominance.

Initially, American national politics largely overlooked cryptocurrency. Although the Internal Revenue Service weighed in as early as 2014 (unsurprising, since it couldn’t tax what it hadn’t classified), crypto remained finance’s red-headed stepchild, trotted out as a cautionary tale by institutionalists in academia, media and Wall Street banks, while the Securities and Exchange Commission largely looked away.

Beneath the surface, something shifted during the initial coin offering mania of 2017, when retail investors and contrarian venture capitalists began wetting their beaks in earnest. Even after CME Futures popped that bubble in January 2018, the crypto genie was out of the bottle, as crypto flowed from outsider nations like China and Russia to insider strongholds in America and Europe. 

These hodlers and adopters were rewarded during the early COVID-19 bull run, which lifted all crypto boats: exchanges, custodians, utilities and VCs. Then came the deliberate shipwreck, delivered by the “institutionalists”: Former SEC Chair Gary Gensler, former US President Joe Biden and Senator Elizabeth…