In the United States, crypto reform legislation isn’t the province of a single political party, and that’s why a former U.S. Congressman, who also pla
In the United States, crypto reform legislation isn’t the province of a single political party, and that’s why a former U.S. Congressman, who also played a prominent role in the Trump administration, believes that passage of a federal “digital assets” law this year is a real possibility.
“Democrats aren’t all on one side; Republicans aren’t all on the other side,” said Mick Mulvaney — budget director and later acting White House chief of staff from January 2019 to March 2020 — further explaining:
“I do think in this Congress, which has got functionally about 14–16 months left before it sort of shuts down before the next election cycle, you will get a meaningful piece of legislation on blockchain/crypto — what we’re referring to collectively as digital assets.”
Mulvaney’s government resume is long and varied. In addition to six years in the U.S. House of Representatives, he was also director of the Office of Management and Budget from February 2017 until March 2020, as well as special U.S. envoy to Northern Ireland — a post from which he resigned on Jan. 7, 2021 — the day after protesters inspired by President Donald Trump attacked the U.S. Capitol Building. Mulvaney is now a strategic adviser to Astra Protocol, a Switzerland-based Web3 Know Your Customer (KYC) platform.
Centralized versus decentralized finance
Mulvaney has an interest in Bitcoin (BTC) and blockchain technology going back nearly 10 years. In 2016, he co-founded the Congressional Blockchain Caucus. Today, he says decentralized finance (DeFi) protocols have some key advantages over their centralized counterparts. Moreover, it’s now possible to integrate key compliance processes like KYC and Anti-Money Laundering into DeFi platforms — something that would reassure regulators.
“There’s a weakness in the system when it comes to the centralized and a strength that comes from decentralized finance,” he said. Much of the fraud commonly associated with the crypto space can be attributed to centralized entities, from Mt. Gox to FTX. DeFi, in his view, brings additional layers of transparency that make engaging in fraudulent activities more difficult, “and over the past decade has proved that it is the better system […] Even regulators are beginning to understand this,” he told Cointelegraph.
‘Regulators dropped the ball’
When speaking with one of the Trump administration’s leading financial managers, it would be hard not to ask about the current banking crisis. Silicon Valley Bank (SVB) was arguably ground zero in this upheaval, with some critics — most notably Senator Elizabeth Warren — criticizing the Trump administration for loosening banking regulations that might have averted SVB’s bankruptcy.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, enacted in response to the financial crisis of 2007–2008, introduced the idea of “stress testing” large U.S. banks deemed too big to fail. However, the testing threshold was revised in 2018, which meant SVB and Signature Bank (also troubled) were no longer considered “systemically important financial institutions” subject to stress testing. As Warren wrote in The New York Times:
“Had Congress and the Federal Reserve not rolled back the stricter oversight, S.V.B. and Signature would have been subject to stronger liquidity and capital requirements to withstand financial shocks.”
Is Warren correct that the previous presidential administration was at least partly to blame? “It would have happened anyway,” answered Mulvaney. “The changes in 2018 were relatively narrow in scope. Essentially, it took banks under $250 billion [in balance sheet assets] out from the very highest level of regulation.”
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Silicon Valley Bank was still subject to bank regulation, just not the very highest. Meanwhile, duration risk, marked by taking short-term deposits and investing them in long-term assets — arguably the key factor in SVB’s downfall — “is one of the simplest, most basic things that the SEC [Securities and Exchange Commission], the FDIC [Federal Deposit Insurance Corporation] and the Fed are supposed to look at,” said Mulvaney. “The very lowest levels of regulation should have caught this.”
“The regulators dropped the ball,” he stated, emphasizing that this was a management failure “at a bank that happened to deal with crypto customers. This was not a crypto-induced problem, and I think that’s important to note.”
Crypto has bipartisan support
Why is Mulvaney so optimistic about the prospects of federal crypto or blockchain legislation this year? Despite everything one hears about political polarization in Washington DC, especially in Congress, some issues remain “fairly bipartisan,” he explained. One is antipathy to China. Another is suspicion of Big Tech. But a third is “an interest in crypto and blockchain.”
Take the House…
cointelegraph.com