Crypto Continues to Battle Internal Conflicts
In a welcoming Washington, the crypto community may be undermining itself.
TroibNews 
Crypto is enjoying a significant moment in Washington, with lawsuits diminishing, an influx of industry-aligned lawmakers in Congress, and a digital asset representative in the White House. However, the industry may be sabotaging itself due to internal conflicts among various factions vying for dominance on commercial and ideological fronts.
Nic Carter, a founding partner at Castle Island Ventures, characterized the crypto community starkly: “They all hate each other,” he observed, while also noting, “But they hate outsiders more.”
There is renewed optimism that crypto-friendly legislation could finally navigate through Congress after years of stalled discussions, as major firms advocate for more tailored regulations. With such enthusiasm, one might assume passing a law would be a straightforward task. Yet, concern is mounting over what proposals can actually make it across the finish line.
Among the major crypto bills, those regulating stablecoins—the privately issued digital cash pegged to the value of the U.S. dollar—are considered the least contentious so far. Yet, even this proposed legislation is embroiled in internal crypto rivalries. Paolo Ardoino, from Tether, the issuer of the world's leading stablecoin, claimed on X that the draft law is a calculated move by competitors to “kill Tether.” Richard Grenell, a high-ranking official from the Trump administration, echoed this sentiment in a post, stating some in the crypto sector are “manipulating the system again to eliminate competition.”
Chris Pavlovski, a Trump ally and head of the video streaming platform Rumble, expressed suspicion about the “toxic stablecoin legislation,” suggesting it is “hurting confidence in crypto,” and asked, “Who’s pushing this garbage?”
This indeed was supposed to be the easy legislation.
The reality is that despite its increasing influence, the crypto industry is remarkably divided, with interests as diverse as traditional finance—if not more. Beyond mere competition, various stakeholders within crypto advocate for different approaches to digital assets and technology. This disunity complicates the notion of being “crypto-friendly” in Washington.
For the crypto sector, the stakes are high. Long criticized as a haven for gamblers and money-launderers, the industry now has an opportunity to redefine itself politically, but this requires its leaders to advocate for more than just rising asset values.
The Trump administration appears to be navigating its strategy regarding the crypto sector, with a White House advisory council on the topic still not fully formed. For the time being, the administration plans to hold a series of industry summits, with the first set for Friday, as indicated by a source familiar with the discussions who wished to remain anonymous.
Coinbase's chief legal officer, Paul Grewal, discussed the fractures within the industry, acknowledging, “it’s a big tent.” He added, “There are lots of different people, and we don’t always, you know, see perfectly eye to eye.”
A fundamental tension lies in the term “cryptocurrency.” Digital tokens like Bitcoin were originally designed as currencies, and their payment utility remains crucial to their long-term value. Nevertheless, in the United States, the prevailing perception is that crypto serves primarily as a means to profit, driving the imperative for upward price movement. However, currencies that fluctuate greatly in value compromise their usefulness. This presents a dilemma: crypto cannot concurrently function as a serious currency and a speculative asset. Instead, stablecoins often facilitate transactions, indirectly reinforcing government-issued currency.
Another point of contention arises from the ideal of decentralized transactions associated with Bitcoin versus the presence of centralized entities like exchanges such as Coinbase and Binance that dominate trading, creating a divide between those supporting centralization and advocates for more decentralized applications.
Infighting has surged recently, particularly following Trump’s endorsement of a “strategic crypto reserve” idea that could centralize specific tokens.
Given the industry's complicated mix of innovation and misconduct, policymakers must have a clear understanding of their objectives.
Washington's long-term interest in the crypto sector has focused on several priorities, including consumer protection and combating illicit financial activities. Leaders also recognize the potential for technology to innovate and enhance financial efficiency.
However, it is crucial that policy decisions shape the future of crypto wisely, taking into account potential unforeseen ramifications.
This brings us back to stablecoins, where any regulatory measures would significantly impact both crypto markets and the U.S. dollar itself. Current legislative proposals in both congressional chambers aim to enhance regulatory oversight of these tokens, requiring them to be backed by highly secure assets to ensure easy dollar redemption and to prevent reliability issues with these digital assets that are designed to resemble U.S. currency.
“Some of the increase in usage is about other countries wanting a way to store value in the dollar,” noted Nellie Liang, former undersecretary of the Treasury for domestic finance under President Biden. “And I think we want to have a framework that provides some credibility to those stablecoins.”
The proposed regulations could bolster firms like U.S.-based Circle but might inhibit Tether’s ability to serve U.S. customers, illustrating a key conflict within this legislation.
Tether has faced scrutiny in the U.S. due to doubts regarding the backing of its tokens and transparency issues but is initiating steps to rebuild trust, recently announcing plans to enhance its financial auditing process. However, Tether may still struggle to fit into the upcoming regulatory framework due to its historically broader reserve practices that include more than just ultra-safe assets. To comply, Tether would need to create a U.S. entity, as oversight by a U.S. regulator would be necessary.
Notably, Tether has been linked to $19.3 billion in illicit financial flows in 2023, as reported by TRM Labs.
In a recent conversation, Dante Disparte, Circle’s head of public policy, refrained from directly commenting on Tether, but indicated industry tensions by asserting that his company is “a fully reserved, totally transparent stablecoin operator.” His remarks seem intended to highlight the differences.
He argued that the “digital currency space race” would be won when “digital dollars, in any form, are responsive to U.S. law,” arguing that some current assets fail to meet this criterion.
George Selgin, an economist at the Cato Institute, compared stablecoins lacking clear regulations to Prohibition-era bathtub gin: an untrustworthy product with questionable components and health risks.
Ultimately, the question facing the crypto sector is how to define a top-tier product. At this juncture, the industry appears unable to reach a consensus.
James del Carmen contributed to this report for TROIB News
Nic Carter, a founding partner at Castle Island Ventures, characterized the crypto community starkly: “They all hate each other,” he observed, while also noting, “But they hate outsiders more.”
There is renewed optimism that crypto-friendly legislation could finally navigate through Congress after years of stalled discussions, as major firms advocate for more tailored regulations. With such enthusiasm, one might assume passing a law would be a straightforward task. Yet, concern is mounting over what proposals can actually make it across the finish line.
Among the major crypto bills, those regulating stablecoins—the privately issued digital cash pegged to the value of the U.S. dollar—are considered the least contentious so far. Yet, even this proposed legislation is embroiled in internal crypto rivalries. Paolo Ardoino, from Tether, the issuer of the world's leading stablecoin, claimed on X that the draft law is a calculated move by competitors to “kill Tether.” Richard Grenell, a high-ranking official from the Trump administration, echoed this sentiment in a post, stating some in the crypto sector are “manipulating the system again to eliminate competition.”
Chris Pavlovski, a Trump ally and head of the video streaming platform Rumble, expressed suspicion about the “toxic stablecoin legislation,” suggesting it is “hurting confidence in crypto,” and asked, “Who’s pushing this garbage?”
This indeed was supposed to be the easy legislation.
The reality is that despite its increasing influence, the crypto industry is remarkably divided, with interests as diverse as traditional finance—if not more. Beyond mere competition, various stakeholders within crypto advocate for different approaches to digital assets and technology. This disunity complicates the notion of being “crypto-friendly” in Washington.
For the crypto sector, the stakes are high. Long criticized as a haven for gamblers and money-launderers, the industry now has an opportunity to redefine itself politically, but this requires its leaders to advocate for more than just rising asset values.
The Trump administration appears to be navigating its strategy regarding the crypto sector, with a White House advisory council on the topic still not fully formed. For the time being, the administration plans to hold a series of industry summits, with the first set for Friday, as indicated by a source familiar with the discussions who wished to remain anonymous.
Coinbase's chief legal officer, Paul Grewal, discussed the fractures within the industry, acknowledging, “it’s a big tent.” He added, “There are lots of different people, and we don’t always, you know, see perfectly eye to eye.”
A fundamental tension lies in the term “cryptocurrency.” Digital tokens like Bitcoin were originally designed as currencies, and their payment utility remains crucial to their long-term value. Nevertheless, in the United States, the prevailing perception is that crypto serves primarily as a means to profit, driving the imperative for upward price movement. However, currencies that fluctuate greatly in value compromise their usefulness. This presents a dilemma: crypto cannot concurrently function as a serious currency and a speculative asset. Instead, stablecoins often facilitate transactions, indirectly reinforcing government-issued currency.
Another point of contention arises from the ideal of decentralized transactions associated with Bitcoin versus the presence of centralized entities like exchanges such as Coinbase and Binance that dominate trading, creating a divide between those supporting centralization and advocates for more decentralized applications.
Infighting has surged recently, particularly following Trump’s endorsement of a “strategic crypto reserve” idea that could centralize specific tokens.
Given the industry's complicated mix of innovation and misconduct, policymakers must have a clear understanding of their objectives.
Washington's long-term interest in the crypto sector has focused on several priorities, including consumer protection and combating illicit financial activities. Leaders also recognize the potential for technology to innovate and enhance financial efficiency.
However, it is crucial that policy decisions shape the future of crypto wisely, taking into account potential unforeseen ramifications.
This brings us back to stablecoins, where any regulatory measures would significantly impact both crypto markets and the U.S. dollar itself. Current legislative proposals in both congressional chambers aim to enhance regulatory oversight of these tokens, requiring them to be backed by highly secure assets to ensure easy dollar redemption and to prevent reliability issues with these digital assets that are designed to resemble U.S. currency.
“Some of the increase in usage is about other countries wanting a way to store value in the dollar,” noted Nellie Liang, former undersecretary of the Treasury for domestic finance under President Biden. “And I think we want to have a framework that provides some credibility to those stablecoins.”
The proposed regulations could bolster firms like U.S.-based Circle but might inhibit Tether’s ability to serve U.S. customers, illustrating a key conflict within this legislation.
Tether has faced scrutiny in the U.S. due to doubts regarding the backing of its tokens and transparency issues but is initiating steps to rebuild trust, recently announcing plans to enhance its financial auditing process. However, Tether may still struggle to fit into the upcoming regulatory framework due to its historically broader reserve practices that include more than just ultra-safe assets. To comply, Tether would need to create a U.S. entity, as oversight by a U.S. regulator would be necessary.
Notably, Tether has been linked to $19.3 billion in illicit financial flows in 2023, as reported by TRM Labs.
In a recent conversation, Dante Disparte, Circle’s head of public policy, refrained from directly commenting on Tether, but indicated industry tensions by asserting that his company is “a fully reserved, totally transparent stablecoin operator.” His remarks seem intended to highlight the differences.
He argued that the “digital currency space race” would be won when “digital dollars, in any form, are responsive to U.S. law,” arguing that some current assets fail to meet this criterion.
George Selgin, an economist at the Cato Institute, compared stablecoins lacking clear regulations to Prohibition-era bathtub gin: an untrustworthy product with questionable components and health risks.
Ultimately, the question facing the crypto sector is how to define a top-tier product. At this juncture, the industry appears unable to reach a consensus.
James del Carmen contributed to this report for TROIB News
