Source: Politico
Compiled and Edited by: BitpushNews Tracy
The crypto industry is experiencing a heyday in Washington. Lawsuits have dissipated, a group of lawmakers supported by the industry have joined Congress, and the White House has welcomed a senior official dedicated to digital asset affairs. However, the crypto industry may have become its own biggest enemy. Due to strategic, commercial and ideological differences, fierce infighting is unfolding within the industry.
Nic Carter, a partner at Castle Island Ventures, bluntly describes the crypto community: "They hate each other." But he adds: "But they hate the outside world even more."
After years of negotiations, there is growing hope that crypto-friendly legislation will pass through Congress, with many leading companies pushing for a regulatory framework more suited to digital assets. In this optimistic atmosphere, one would expect legislative efforts to be smooth sailing.
But now, I begin to doubt whether any bill can truly be implemented.
Even the least controversial stablecoin bill - a regulatory framework for privately-issued digital currencies pegged to the US dollar - has now been embroiled in internal conflicts within the crypto industry.
Paolo Ardoino, who leads Tether, the world's largest stablecoin issuer, 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 a post that "some crypto companies are again manipulating the system to try to eliminate competition."
Chris Pavlovski, CEO of the video streaming platform Rumble (which has a partnership with Tether), also posted on X, expressing his suspicion that this "toxic stablecoin legislation" is undermining market confidence in the crypto industry.
"Who the hell is pushing this crap?" he added.
This should have been the easiest bill to pass.
In fact, despite the growing influence of the crypto industry, it remains a highly fragmented industry with complex internal interests, even more difficult to coordinate than traditional finance. In addition to basic market competition, the crypto industry also has major disagreements on the future development direction of digital assets and related technological paths.
For Washington, "supporting crypto" is far from as simple as imagined.
But for the crypto industry, this is a matter of survival. For a long time, the industry has been labeled by the outside world as a haven for speculators and money launderers. Now, it faces a critical moment to redefine itself and shape its political influence - provided that industry leaders are willing to push for more than just higher coin prices.
Currently, the Trump administration seems to still be exploring how to deal with the crypto industry. According to insiders, the White House's Cryptocurrency 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 crypto industry to Coinbase's Chief Legal Officer Paul Grewal, he acknowledged: "This is a broad field."
"There are a lot of different people in the industry, and we don't always fully agree," he said.
In fact, the very term "cryptocurrency" itself implies a contradiction.
Digital assets like Bit were originally conceived as currencies, and their application in payments is still the core argument supporting their long-term value. However, especially in the US, the mainstream perception of cryptocurrencies leans more towards investment tools, with the core market goal often being to drive price appreciation.
But if the value of a currency fluctuates violently, it becomes difficult to use it widely in actual payments. In other words, cryptocurrencies aspire to be both a serious monetary system and a speculative market goldmine, which are incompatible. Currently, the vast majority of crypto payments are made through Tether, which is essentially a supplement to government fiat currencies, rather than a true competitor.
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 crypto industry has depended 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.
Furthermore, the legality and acceptance of different crypto assets is also a focus of internal industry disputes. Especially this week, with Trump's post supporting the establishment of a "strategic crypto reserve" to hoard certain specific tokens, a new round of discussion has been triggered.
The crypto industry has always walked 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 crypto 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 crypto industry. Therefore, decision-makers need to be cautious in formulating regulatory frameworks, avoiding unexpected consequences.
This also brings the focus to Tether, as any related legislation will simultaneously impact the crypto 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 and other stablecoin issuers, requiring these tokens to be backed by highly secure assets to ensure they can be redeemed for US dollars at any time. The core goal of this measure is to prevent digital assets that are supposed to be pegged to the US dollar from facing credit risks.
"The growth in the use of Tether is partly because other countries want to store US dollar assets through it," said Nellie Liang, former Under Secretary for Domestic Finance at the Biden administration's Treasury Department. "So we need to establish a regulatory framework that can give these Tether credibility."
The current legislative direction may benefit US-based stablecoin 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, the former Commerce Secretary, and Cantor Fitzgerald, but it has long faced scrutiny 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 ultra-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 the tensions within the industry, describing Circle as a "fully-reserved, highly transparent stablecoin operator" - seemingly in stark contrast to Tether.
He also stated that the "digital currency space race" will be won by those digital US dollars that comply with US laws, and not all stablecoins currently meet this requirement.
George Selgin, an economist at the libertarian Cato Institute, likened unstable stablecoins to the bootleg distilleries of the Prohibition era - with unknown ingredients, unquantifiable risks, and full of uncertainty.
But for the entire crypto industry, the real question is: what kind of Tether can be considered a "quality product"? At the moment, the industry has clearly not reached a consensus on this.
