By Joseph Raczynski (+Art)
Consensus 2023 is a wrap! With over 15,000 attendees in Austin, Texas they were a testament to the level of optimism that still remains in the crypto space despite a lack of regulatory clarity. The event was attended by people from traditional finance, Web3, government agencies, and crypto advocates, all of whom had a common goal of finding some common ground clarity for crypto. This optimism was shared by both traditional finance and crypto-adjacent infrastructure, and was highlighted by PepsiCo's head of communications, Kate Brady, who spoke on the need for regulators to offer a platform for this bourgeoning global technology.
The conference was held in the midst of a number of regulatory developments, including a bill to assess crypto’s use for criminal activities, multiple hearings addressing stable coins, and reports from the Federal Reserve, the Federal Deposit Insurance Corporation, the Government Accountability Office and the New York Department of Financial Services. Those reports explain what they see as the root causes for the failures of Signature Bank and Silicon Valley Bank, and ultimately exonerate crypto, casting much of the culpability on traditional finance.
In addition to the discussion of the core regulatory issues, the conference also highlighted the collaboration between DeFi advocates and regulators. DeFi advocates were adamant that regulators will eventually come around to the power and purpose of DeFi, and that DeFi could provide real-time auditability, an immutable record of transactions, and the ability to easily track users. The panel discussion between Uniswap’s legal chief Salman Banaei, dYdX’s marketing lead Nathan Cha, Maple Finance co-founder Sidney Powell and The Defiant founder Cami Russo highlighted the importance of the collaboration between the two groups. One clear point emerged, the intrinsic benefits of blockchain have proved out that statistics show how DeFi has a higher seizure rate of illicit funds than the traditional financial system.
The session hosted by Jesse Hamilton on the turf war between the CFTC and the SEC was interesting and highlighted the fact that regulations will likely continue to be a hot mess for the foreseeable future. The conversations between builders of decentralized finance (DeFi) and financial regulators brought up the issue of whether linguistic agreement could be found at Consensus. Some financial watchdogs have said crypto clearly fits into the existing regulatory framework, but the SEC's authority is "transaction by transaction" and this has caused them to resort to bringing individual enforcement actions.
The clear view at the conference was that banning crypto is simply the wrong policy, and that Congress, the courts, and the international community have already rejected the idea. It was noted that many in Congress support embracing and regulating crypto, and that multiple U.S. Senators have been willing to introduce bipartisan legislation on the issue. The courts were also mentioned as a foundational arbitrator, as they have reined in agencies operating beyond congressional mandate in the past.
Ultimately, most surmised banning crypto in the United States would mean that foreign companies reimport the possibility of even more risk back into the United States under different guidelines. The International Monetary Fund has asserted that comprehensive regulations are preferred to blanket bans because those bans would stifle innovation, drive illicit activities underground, be costly to enforce and motivate users to access illegal markets.
Overall, the conference showed that there is a lot of optimism in the crypto space, and that collaboration between DeFi and regulators is key to the success of the industry. It is clear that banning crypto is not the answer, and that regulation and collaboration are the way forward. It is now up to Congress and financial watchdogs to come together and create a comprehensive and thoughtful regulatory framework for crypto. As fundamentally, blockchain allows for the creation of a single source of truth, the ability to easily track transactions, and the ability to create digital assets, all of which are extremely useful in the digital economy.