The intimate conversation between two prominent crypto-sector thought leaders provided a comprehensive snapshot of how far the U.S. financial technology regulatory discussion has come. Its tone resonated through following panels with other influential crypto policy experts including SEC Commissioner Hester Pierce, CFTC Commissioner Kristin Johnson, Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY), Representative Ritchie Torres (D-NY) and others.
Emmer reflected on the evolution of the discussion in D.C, highlighting the 2021 Infrastructure Investment and Jobs Act as the pivotal moment when lawmakers recognized both crypto’s innovation potential and its strong support among American voters.
“We had worked hard to get Congress to pay attention, but it wasn’t until that bill that this grassroots group [was] activated. That was years of growth in a short period of time,” he said.
Emmer emphasized the nonpartisan nature of crypto industry advocacy since the bill’s passage, citing the significant progress made with the Clarity for Payment Stablecoins Act of 2023. He asserted that the voice of crypto is gaining traction, transcending political divides.
Tom Emmer and Marco Santori at the 2023 Blockchain Association Policy Summit
Santori led a frank discussion on U.S. governmental attempts to curtail private sector innovation by increasing regulatory controls.
“The central bank mismanaged our financial system. That’s why crypto exists,” Emmer said. “Then, people started trying to snuff out innovation; you can’t, it’s coming, it’s here already.”
Emmer also described support for central bank digital currencies (CBDCs) as misguided. “It’s nothing more than a surveillance tool if they can’t make it open, permissionless and private. Which they can’t.”
He pointed out that Congress is the branch of government Constitutionally empowered to regulate these matters, cautioning against granting unchecked authority to agencies or waiting for court decisions to establish market structure. He stressed that the ultimate job of Congress is to protect the rights of citizens through common sense legislation.
Defending clients against “completely unworkable” IRS rules
Elsewhere at the conference, Kraken’s Global Head of Tax Michael Nydegger led a panel of tax experts that included CoinTracker COO Vera Tzoneva and Coinbase Vice President of Global Tax Lawrence Zlatkin. Nydegger said the latest proposed IRS broker regulations are “completely unworkable.”
He explained the original, narrow mandate of the change to the broker reporting rule adopted by Congress: to close a perceived tax gap and help fund the aforementioned 2021 Infrastructure Investment and Jobs Act. Nydegger said that as currently written, the proposed, sprawling Treasury regulations enacting Congress’ change would overburden an entire industry.
Nydegger noted that companies like Kraken are best situated to implement the sort of legislation Congress originally intended.
“With the way we enforce know-your-customer controls and gather data about our customers, we are in a position to be able to comply with this kind of rule,” he said. “When moving to the decentralized space, the rules would require systems [that] don’t even exist.”
When asked about ways to improve the rule, the panelists agreed that tax reporting could be better solved at the blockchain level or by using the information on smart contracts recorded on blockchains. All agreed that the timeframe proposed to implement the rule was incredibly short for the kind of systems and data reporting that the rule would require.
The panel agreed that the proposed rule’s challenges would create excessive, inaccurate and duplicative documentation. Taxpayers might have to sort through dozens of tax reporting forms to figure out what taxes they owe on crypto trades. The IRS systems would also have to be developed to ingest the massive amount of information required under the proposed regulations.
The panel agreed that a more phased or measured implementation focused in the right places would have made more sense. All expressed hope that industry recommendations would lead to thoughtful adjustments before the rule is finalized.
Industry strength and what’s next for regulation
Overall, the conversation throughout the conference echoed Rep. Emmer’s optimistic tone.
Many noted the joint effort by both the House Financial Services Committee and the House Committee on Agriculture to define key questions about crypto market structure and regulation, a foundational requirement so the United States can remain globally competitive in the industry.
High-profile message bearers all noted the progress crypto market participants have made to raise concerns and influence change. Most credited the industry for creating jobs and promoting innovation, noting the urgency to protect these priorities alongside consumer interests as U.S. regulation comes into focus.
Regardless of the current state of politics, crypto’s advocacy efforts were repeatedly lauded by regulators and attendees alike for improving Congressional understanding of this emerging technology and its potential in the global economy.
These materials are for general information purposes only and are not investment advice or a recommendation or solicitation to buy, sell, stake or hold any cryptoasset or to engage in any specific trading strategy. Kraken does not and will not work to increase or decrease the price of any particular cryptoasset it makes available. Some crypto products and markets are unregulated, and you may not be protected by government compensation and/or regulatory protection schemes. The unpredictable nature of the cryptoasset markets can lead to loss of funds. Tax may be payable on any return and/or on any increase in the value of your cryptoassets and you should seek independent advice on your taxation position. Geographic restrictions may apply.
