Compiled by: BitpushNews Tracy
The Bit industry is experiencing a heyday in Washington. Lawsuits are dissipating, a group of legislators supported by the industry have entered Congress, and the White House has also welcomed a senior official responsible for digital asset affairs. However, the Bit industry may have become its own biggest enemy. Due to strategic, commercial and ideological differences, fierce infighting is taking place within the industry.
Nic Carter, a partner at Castle Island Ventures, bluntly describes the Bit community: "They hate each other." But he added: "However, they hate the outside world even more."
After years of negotiations, there is growing hope that Bit-friendly legislation will be passed through Congress, with many leading companies pushing for a regulatory framework more suited to the characteristics of digital assets. Logically, in this optimistic atmosphere, legislation should be a smooth process.
But now, I begin to doubt whether any bill can truly be implemented.
Even the least controversial Tether bill - a regulatory framework for privately issued digital currencies pegged to the US dollar - has now been embroiled in internal conflicts within the Bit industry.
Tether, led by Paolo Ardoino, is the world's largest Tether issuer, and he posted on X that this draft legislation is a means for competitors to "strangle Tether". Richard Grenell, a former senior foreign policy official in the Trump administration, seemed to agree, writing in the post: "Some Bit companies are again manipulating the system, trying to eliminate competition."
Chris Pavlovski, CEO of the video streaming platform Rumble (which has a partnership with Tether) and an ally of Trump, also posted on X, saying he suspects this "toxic Tether legislation" is undermining market confidence in the Bit industry.
"Who the hell is pushing this crap?" he added.
You have to know that this should have been the easiest bill to pass.
In fact, despite the growing influence of the Bit industry, it is still a highly fragmented industry with complex internal interests, even more difficult to coordinate than traditional finance. In addition to basic market competition, the Bit industry also has huge differences within on the future development direction of digital assets and related technical paths.
For Washington, "supporting Bit" is far from as simple as imagined.
But for the Bit industry, this is more about survival. For a long time, the industry has been labeled by the outside world as a paradise for speculators and money launderers. Now, it is facing a critical moment to redefine itself and shape its political influence - provided that industry leaders are willing to push for more than just higher Bit prices.
Currently, the Trump administration seems to still be exploring how to deal with the Bit industry. According to insiders, the White House's Bit Currency Advisory Council has not yet been formally established, and the current plan is to hold a series of summits with the industry first.
The first summit is scheduled for this Friday.
When I mentioned the divisions within the Bit industry to Coinbase's Chief Legal Officer Paul Grewal, he frankly admitted: "This is an all-encompassing field."
"There are many different people in the industry, and we don't always fully agree," he said.
In fact, the very term "Bit currency" implies a contradiction.
Bit assets like Bit were originally conceived as currencies, and their application in the payment field is still the core argument supporting their long-term value. However, especially in the US, the mainstream perception of Bit currencies tends to be more of an investment tool, with the core market goal often being to drive price increases.
But if the value of a currency fluctuates violently, it will be difficult to be widely used in actual payments. In other words, Bit currencies want to be both a serious monetary system and a speculative market goldmine, which are incompatible. Currently, the vast majority of Bit payments are made through Tethers, which are essentially a supplement to government fiat currencies, rather than true competitors.
Another contradiction is that the core selling point of Bit is decentralization, allowing transactions to no longer rely on traditional financial institutions like banks. However, the development of the Bit industry has relied on centralized platforms such as Exchanges like Coinbase and Binance, serving as the core infrastructure for market trading. This naturally creates a split between the ideal of decentralization and the reality of centralization.
In addition, the legality and recognition of different Bit assets is also a focus of controversy within the industry. Especially this week, Trump's post supporting the establishment of a "strategic Bit reserve" to hoard certain specific tokens has sparked a new round of discussion.
The Bit industry has always been walking the line between innovation and fraud, and regulators need to truly clarify what kind of industry they want to support.
Washington's long-term focus on the Bit industry has mainly centered 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 enable new innovations.
But it cannot be ignored that the government's policy choices will directly affect the future development of the Bit industry. Therefore, decision-makers need to be cautious when formulating regulatory frameworks, avoiding unexpected consequences.
This also brings the focus to Tethers, as any relevant legislation will simultaneously impact the Bit market and the global status of the US dollar.
Currently, bills proposed in both houses of the US Congress aim to strengthen the regulation of Tether issuers, requiring these tokens to be backed by high-security assets to ensure they can be redeemed for US dollars at any time. The core goal of this measure is to prevent digital assets pegged to the US dollar from facing credit risks.
"The increased use of Tethers is partly because other countries want to store US dollar assets through them," said Nellie Liang, former Deputy Secretary of the Treasury for Domestic Finance in the Biden administration. "Therefore, we need to establish a regulatory framework that can give these Tethers credibility."
The current legislative direction may benefit domestic Tether issuers like Circle, but it may also restrict Tether's operations in the US market - this is one of the core controversies behind this bill.
Tether has close ties with Howard Lutnick, former Commerce Secretary, and Cantor Fitzgerald, but has long faced questions in the US, with regulators having doubts about the transparency and compliance of its reserve assets. To this end, Tether has recently begun to enhance transparency and announced on Monday that it is pushing for a comprehensive financial audit to address market concerns about its reserves and stability.
However, Tether may still find it difficult to be included in the emerging legislative framework. Its reserve assets not only include super-safe cash and US Treasuries, but also a wider range of asset classes. Furthermore, if Tether wants to accept US regulation, it must establish an entity in the US, which could be a major obstacle for a company headquartered in El Salvador.
According to a report by TRM Labs, Tether was involved in $19.3 billion in illicit financial transactions in 2023, far exceeding its competitors.
Dante Disparte, Head of Public Policy at Circle, did not directly comment on Tether in an interview, but hinted at tensions within the industry, describing Circle as a "fully reserved, highly transparent Tether operator". This seems to be in stark contrast to Tether.
He also said that the "space race of digital currencies" will be won by those digital US dollars that comply with US laws, and currently not all Tethers meet this requirement.
George Selgin, an economist at the libertarian think tank Cato Institute, likened unregulated Tethers to the moonshine of the Prohibition era - with unknown ingredients, unquantifiable risks, and full of uncertainty.
But for the entire Bit industry, the real question is: what kind of Tether can be considered a "quality product"? At the moment, the industry has clearly not yet reached a consensus.
