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Tom Williams/CQ Roll Call via AP Images
SEC Chair Gary Gensler arrives for the House Financial Services Committee hearing titled “Oversight of the Securities and Exchange Commission,” April 18, 2023, on Capitol Hill.
In the past week, a new advertising campaign from an organization called Digital Innovation for America (DIFA) launched across Twitter and Facebook. I encountered it over and over again in my social media feeds. These kinds of pop-up campaigns from mysterious front groups are common, but shedding a little more light on them can illustrate the way these campaigns work, and how they gain power.
Digital Innovation for America’s Twitter page was created in March 2023, along with its Facebook page. On LinkedIn, they popped up about a week ago. The DIFA website, which was registered anonymously, lists no affiliations with individuals. It’s rather strange for a group to not have a spokesperson when it ostensibly aims to “unleash a new era of prosperity” for those who have been “kept out of our traditional banking system.”
On Twitter, DIFA calls itself “the voice for every American who seeks to harness the promise of blockchain & digital assets for a more empowered future,” capped off with a U.S. flag emoji. Strangely, DIFA claims that crypto companies leaving the United States would somehow offshore “the next generation of American jobs.” Crypto is seen as a lot of things, but a job creator would be a new one. That foreign crypto companies would be out of reach of U.S. regulators and law enforcement, another dark warning from industry supporters, would be news to those who shacked up at the FTX compound in the Bahamas.
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At the same time as DIFA’s warning about crypto flight, Coinbase’s CEO Brian Armstrong threatened to have his company leave the U.S. due to lack of regulatory clarity. Coinbase has received notice from the SEC that it is about to sue the company for securities violations.
Meanwhile, the industry’s reputational damage from the cascading series of collapses of exchanges like FTX and other companies last year is clear, as its trade groups and affiliated organizations have dropped “crypto” for the more corporate-friendly sounding “digital assets.” According to Pew Research polling, almost 90 percent of Americans had heard about crypto, and among them, 75 percent saw it as an unreliable and unsafe vehicle for investment.
On Monday evening, DIFA appeared on my radar because of a promoted tweet in my Twitter feed. It featured an Instagram-like infographic of Securities and Exchange Commission Chair Gary Gensler, with a simple message: “No Clarity Gary. Destroying Digital Innovation.” The tweet implied that Gensler was in cahoots with big banks, using his powers at the SEC to crush “financial freedom for Americans.” The final call to action asked readers to “Join the new voice of the digital asset community and protect the economy.”
This broad message, that a lack of guidance from the SEC is the reason for crypto’s fall, has been repeated elsewhere. CoinDesk, the Bitcoin and cryptocurrency news website, published an op-ed from one of its executive editors about why the SEC’s current operations were directly pushing the industry out of the U.S. That story is linked at DIFA’s website.
The ad appeared the night before Gensler was slated to testify before the House Financial Services Committee, at a hearing called “Oversight of the Securities and Exchange Commission.” Gensler has become a key target for both Republicans and the finance industry in recent months. Semafor reported last month about how President Biden’s Wall Street supporters were becoming frustrated with Gensler, and would consider holding back financial support. And late last year, Rep. Tom Emmer (R-MN), one of the key lawmakers who tried halting the SEC’s inquiry into the collapse of FTX, told Politico, “Gary Gensler might as well bring a cot because he’s going to be spending a lot of time in front of the [House Financial Services Committee].”
Ahead of the hearing, the House Financial Services Republicans published a letter that mirrored DIFA’s broad talking points.
Essentially, the Republican and DIFA argument is that crypto platforms are not minting and trading securities, and thus should be exempt from the regulations Gensler has pushed for. This message is irreconcilable with the fact that anybody who purchases crypto is doing so in the hope of future gains. That’s how such tokens are marketed from the start.
Industry actors have tried to position crypto as not just a digital currency for illicit uses, but a new digital channel for investment. Yet the regulatory framework that industry and crypto-friendly politicians are advocating for is clear—a hands-off, carved-out approach, exempting cryptocurrency and its intermediaries from the existing laws that cover other forms of investment.
A second emerging talking point is that crypto firms don’t know how to register their products as securities, when the real issue is that they don’t want to.
Still, the DIFA release was well timed. Next week, the House Financial Services Committee is set to host “The Future of Digital Assets: Identifying the Regulatory Gaps in Digital Asset Market Structure.” At time of writing, there is no witness list.
That hearing is slated for the same time that another major crypto event is set to take place in Austin, Texas. The Consensus 2023 conference, held the day after the Financial Services Committee hearing, will be hosting committee chair Rep. Patrick McHenry (R-NC) and “crypto hero” Sen. Cynthia Lummis (R-WY), for a lawmaker town hall “on the process of writing crypto legislation and the plausible outcomes for 2023 and beyond.”
Some of that legislation has already been written. On April 15, the committee released a 73-page “discussion draft” bill for regulating stablecoins. Nearly all of the major stablecoin firms are under federal investigation. The bill was supposed to come out of bipartisan discussions, but the committee’s ranking Democrat Maxine Waters (D-CA) blasted it and said the entire legislation needed to start from scratch. Nevertheless, it’s a deliverable that Republicans can bring to the Consensus 2023 conference.
Despite the reputational blunder for the cryptocurrency industry last year, it seems that groups like DIFA will not ease off. And that calculation on their part seems wise, as lawmakers still find it amenable to appear at industry-friendly conferences. In other words, crypto’s presence in Washington is not going away anytime soon.
