Source: Politico
Compiled and edited by: BitpushNews Tracy
Crypto is having a heyday in Washington. Lawsuits are being dismissed, a group of industry-backed lawmakers are entering Congress, and the White House has a senior official dedicated to digital assets. But now crypto may be its own worst enemy. Fierce infighting is underway within the industry over strategic, commercial and ideological disagreements.
Nic Carter, a partner at Castle Island Ventures, put it bluntly: “They hate each other.” But he added: “They hate the outside world even more.”
After years of negotiations, hopes for crypto-friendly legislation to pass Congress have increased, and many leading companies are pushing for a regulatory framework that is more in line with the characteristics of digital assets. It stands to reason that under this optimistic mood, the promotion of legislation should be a natural outcome.
But now, I am beginning to doubt whether any of the bills will actually get passed.
Even the least controversial stablecoin bill — a regulatory framework for private digital currencies pegged to the U.S. dollar — is now embroiled in the crypto industry’s internal disputes.
Paolo Ardoino, whose Tether is the world’s largest stablecoin issuer, wrote on X that the draft legislation was an attempt by competitors to “kill Tether.” Richard Grenell, a former senior diplomat in the Trump administration, seemed to agree, writing in a post: “Some crypto companies are once again manipulating the system to try to eliminate competition.”
Chris Pavlovski, a Trump ally and CEO of video streaming platform Rumble (which has partnered with Tether), also posted on X, expressing his suspicion that this **toxic stablecoin legislation** is undermining market confidence in the crypto industry.
“Who the hell is pushing this crap?” he added.
You know, this should have been the easiest bill to pass.
In fact, despite the growing influence of the crypto industry, it is still a highly divided industry with complex internal interests that are even more difficult to coordinate than traditional finance. In addition to basic market competition, there are also huge differences within the crypto industry on the future development direction of digital assets and related technical paths.
For Washington, "supporting encryption" is far from as simple as imagined.
But for the crypto industry, this is more about survival. Long labeled a haven for speculators and money launderers, the industry now faces a critical moment to redefine itself and shape political influence — if its leaders are willing to push for more than just higher prices.
At present, the Trump administration seems to be still groping for how to deal with the crypto industry. According to people familiar with the matter, the White House's cryptocurrency advisory committee has not yet been formally established, and the current plan is to start a series of summit discussions with the industry.
The first summit is scheduled for this Friday.
When I asked Paul Grewal, Coinbase’s chief legal officer, about the divisions within the crypto industry, he said, “It’s a wide-ranging space.”
“There are a lot of different people in the industry, and we don’t always see eye to eye,” he said.
In fact, the word “cryptocurrency” itself implies a contradiction.
Digital assets such as Bitcoin were originally conceived as currencies, and their use in payments remains a core argument for their long-term value. However, especially in the United States, the mainstream perception of cryptocurrencies is more inclined towards investment tools, and the core goal of the market is often to drive price increases.
But if the value of a currency fluctuates wildly, it will be difficult for it to be widely used in actual payments. In other words, cryptocurrencies want to be both a serious monetary system and a gold mine for speculative markets, and these two are difficult to reconcile. Currently, the vast majority of crypto payments are completed through stablecoins, which are essentially a supplement to government fiat currencies rather than a real competitor.
Another contradiction is that the core selling point of Bitcoin is decentralization, which makes transactions no longer dependent on traditional financial institutions such as banks. However, the development of the crypto industry relies on centralized platforms, such as exchanges like Coinbase and Binance, which serve as the core infrastructure for market transactions. This has formed a natural split between the decentralized ideal and the centralized reality.
In addition, the legitimacy and recognition of different crypto assets are also the focus of controversy within the industry. Especially this week, Trump posted a post supporting the establishment of a "strategic crypto reserve" in the hope of hoarding certain specific tokens, which triggered a new round of discussion.
The crypto industry has been walking on the line between innovation and scams, and regulators need to really clarify what kind of industry they want to support.
Washington's long-term focus on the crypto industry has mainly focused on consumer protection and preventing illegal financial activities. At the same time, policymakers also hope to promote the development of underlying technologies to further improve financial efficiency and promote new innovations.
However, it cannot be ignored that the government’s policy choices will directly affect the future development of the crypto industry. Therefore, decision-makers need to act cautiously when formulating regulatory frameworks to avoid unintended consequences.
This also puts the spotlight on stablecoins, as any related legislation will affect both the crypto market and the global status of the US dollar.
Currently, bills proposed by both houses of the U.S. Congress aim to strengthen supervision of stablecoin issuers, requiring these tokens to be backed by highly secure assets to ensure that they can be exchanged for U.S. dollars at par at any time. The core goal of this measure is to prevent credit risks in digital assets that are supposed to be anchored to the U.S. dollar.
“The growth in the use of stablecoins is partly due to other countries wanting to store dollar assets in it,” said Nellie Liang, former undersecretary of the Treasury Department for domestic financial affairs in the Biden administration. “So we need to establish a regulatory framework that can give these stablecoins credibility.”
The current legislative direction may benefit U.S.-based stablecoin issuers, such as Circle, but it may also restrict Tether’s operations in the U.S. market - this is one of the core controversies behind the bill.
Tether has close ties with Cantor Fitzgerald, where U.S. Commerce Secretary Howard Lutnick once worked, but has long faced questions in the U.S., where regulators have doubts about the transparency and compliance of its reserve assets. To this end, Tether has recently begun to strengthen transparency and announced on Monday that it is promoting a comprehensive financial audit in response to market concerns about its reserves and stability.
However, Tether may still have difficulty fitting into the emerging legislative framework. Its reserve assets include not only ultra-safe cash and U.S. Treasuries, but also a wider range of asset classes. In addition, if Tether is to be regulated by the United States, it must establish an entity in the United States, which may be a significant obstacle for the company headquartered in El Salvador.
According to a report by TRM Labs, Tether was involved in $19.3 billion in illegal financial transactions in 2023, far exceeding its competitors.
Circle’s head of public policy, Dante Disparte, did not comment directly on Tether in the interview, but he hinted at tensions within the industry and described Circle as a “fully-reserved, highly transparent stablecoin operator,” seemingly in contrast to Tether.
He also said that the "digital currency space race" will be won by digital dollars that comply with U.S. law, which not all stablecoins currently meet.
George Selgin, an economist at the liberal think tank Cato Institute, compared the lack of clear regulation of stablecoins to underground distilleries during the Prohibition era - the ingredients are unknown, the risks are unpredictable, and there is a lot of uncertainty.
But for the entire crypto industry, the real question is: what kind of stablecoin can be regarded as a "high-quality product"? At present, there is obviously no consensus within the industry.
