The crypto industry's complex policy game

• The dilemma now for the industry is whether to press Congressional leaders to go for everything all at once, and in the process risk not getting any legislation.

Zoom in: Eli Cohen, general counsel for Centrifuge, which puts traditional assets on blockchains, fears that linking stablecoin legislation with a less advanced market structure bill — the name for the broader regulatory legislation — could sink both.

• Several other sources reached by Axios said much the same.
• "Market structure is naturally hairier than stablecoins," Kelly Greer, general partner at digital asset infrasctructure investor, Crucible Capital, tells Axios.
• "America simply cannot drag its feet on a bill that would solidify the strength of the U.S. dollar," Nathan McCauley, CEO of crypto bank, Anchorage Digital, tells Axios, referring to the Senate's stablecoin bill, GENIUS. "Market structure cannot be a hold up—full stop."

This strategic game is playing out in Washington. The Senate passed GENIUS, which has momentum and political will.

• The President would like to sign it right now.
• But the House leadership wants to use that momentum to help get its market structure bill over the line as well.

Between the lines: Notching a win for stablecoins for many in the industry is too important to gamble.

• Passing GENIUS would provide a green light for financial companies to issue and conduct business in stablecoins, and could bring large players into the mix.
• That fact alone would improve the chances for further action, Cohen argues. "Fighting on the same side as JPMorgan and Citibank will allow for and facilitate better regulatory results," he says.

The other side: Others believe that stablecoin and market structure legislation is so inextricably linked and complementary that it makes sense to move them together — and that it's worth the risk.

• "These issues are deeply interconnected; passing them in tandem creates a coherent, trusted regulatory framework," Jason Allegrante, the legal chief at blockchain software platform Fireblocks, tells Axios.
• "These conversations should nicely dovetail. It will be 1.5 extra time not 2X," Katherine Dowling, general counsel at Bitwise, a creator of digital asset investment products, tells Axios.

What's at stake

The industry currently has no clear regulatory rules, which makes large companies reluctant to participate and drives upstart innovators overseas, robbing the U.S. of economic growth.

• Participants would like clear lines of oversight for the various kinds of assets issued on blockchains, with agencies responsible for going after bad actors.

• "Neither the SEC nor CFTC has the authority to regulate spot markets for digital commodities, like BTC and ETH," Miles Jennings, the general counsel for venture capital firm A16z crypto, tells Axios, which leaves bad actors with way too much leeway, he says.
• "Some institutions won't move off the sidelines or have the comfort they need as fiduciaries without more certitude," Dowling says.

If GENIUS was enacted but market structure failed, the SEC could likely provide significant clarity for market participants. That would go a long way, but it wouldn't be everything the industry wants.

• Generally, sources told us that legislation would engender more confidence than regulatory rulemaking, as so many market actors are still reeling from the prior administration's non-stop attacks.
• "Rulemaking can be a good start," McCauley says, but "it really cannot provide the same level of regulatory certainty that institutions need."
• "Historically, major regulatory frameworks have been walked back before, especially in areas tied to evolving political and economic agendas," Allegrante tells Axios.

Zoom out: Despite the current debate, industry players feel more confident than they ever have.

• "From this point forward, all Democratic administrations will be pro crypto," Justin Slaughter, VP for regulator affairs with cryptocurrency venture fund Paradigm, tells Axios.
• "The 2021-2025 war on crypto has ended, not with armistice but a vacating of the field, with all but a few of the most pugnacious guns falling silent."

The bottom line: Stablecoin legislation looks easy(ish) right now. Market structure looks hard, and Congress's attention span is short.