Legal expert discusses how US political climate could redefine crypto regulations

Crypto.news recently spoke with Bing Wang, Head of Legal at BasedVC, who shared his perspectives on the political ascent of cryptocurrencies and the upcoming regulatory transformations.

As the 2024 U.S. elections approach, the political landscape around cryptocurrencies is undergoing major changes.

Surprising alliances are forming in Congress, with crypto-friendly laws gaining bipartisan support. Key figures like Chuck Schumer and former House Speaker Nancy Pelosi, who have traditionally held differing views, are now emerging as unexpected allies.

The Biden administration has begun to show a newfound openness with crypto policy, suggesting that skeptics like Senator Elizabeth Warren may soon find themselves isolated.

On the Republican side, former President Donald Trump has intensified his support for the crypto community, pledging to protect digital asset traders and accepting campaign donations in cryptocurrency.

It is quite evident that the role of cryptocurrencies is expected to be a pivotal issue this year, something that could shape the future regulatory landscape for the emerging sector.

Wang believes this shift in political dynamics will accelerate the mainstream adoption and integration of cryptocurrencies in the U.S.

How significant do you believe the role of cryptocurrencies will be in the 2024 U.S. elections?

Crypto has always been important in US politics. The famous case of Sam Bankman-Fried and FTX had him funneling crypto money to candidates in the US midterms. However, the impact in the forthcoming 2024 elections will be outsized. With crypto-friendly legislation moving through Congress in the last 3 weeks, Democrats and Republicans are leaning into embracing crypto even further. The elections will have crypto on its agenda, and having a positive sentiment towards it will be a key talking point.

The Biden administration has shown a shift in its stance on cryptocurrencies, evidenced by the approval of spot Ether ETFs and engagement with crypto industry experts. What impact could these changes have on the cryptocurrency sector, and do you think they will address the concerns of crypto enthusiasts who have been critical of the administration’s previous policies?

The Biden administration’s sudden position shift is a huge moment in crypto. Some have alleged that it’s an attempt to bamboozle the electorate, but that doesn’t matter, as it seems to address concerns the industry has long had. The House has passed a bill to repeal the Securities and Exchange Commission crypto guidance that has had the regulator negatively grip the market. If signed into law, the new bill will help overhaul the SEC and CFTC oversight of crypto and create a more streamlined guide to crypto regulation. That’s a big win for the industry.

Considering the bipartisan support for cryptocurrency-related legislation such as the Deploying American Blockchains Act and the FIT21 Act, what specific regulatory changes can the crypto community anticipate in the coming years?

Pro-crypto senators are banding together, and an attempt to revive previously moribund crypto bills is underway. The Biden Campaign has begun to discuss digital asset policy with Democratic allies, while Stabenow’s Bill to overhaul how the SEC and CFTC share oversight over crypto is back on the table. Stablecoin legislation is also being negotiated in the House. It’s expected that the coming years will see a flurry of legislation that will attempt to give a clear path about crypto regulations, something most crypto companies have yearned for.

Do you think government engagement with crypto industry experts will help improve public understanding and awareness of cryptocurrency technologies?

Much like the Senate has tried to engage with Social media companies like Facebook, TikTok, and X (formerly Twitter), stakeholders must meet at roundtables to discuss pressing issues. Avoiding meeting with crypto industry experts can only prove detrimental in the long run. As conversations continue, I firmly believe this will help boost confidence in digital assets.

What are your thoughts on the potential consequences of appointing crypto-friendly officials to key regulatory positions?

Well, crypto-friendly officials will generally mean faster decisions and a more positive outlook towards crypto by key decision-makers. I don’t see a net negative to this move, except that it will help improve policymaking in the crypto space. Anti-crypto crusades by uninformed officials will only simmer with time, and most will have no option but to get with the program.

How might U.S. policy changes impact the growing interest in self-custody and privacy within the crypto community?

Changes in policy will significantly impact how crypto affects the crypto landscape. Increased scrutiny will undermine the privacy features of some cryptocurrencies, as regulators may require a more stringent approach to traceability and transparency in transactions. Stricter KYC and AML requirements may be put in place.

And what could be the broader implications for crypto security and user autonomy? 

This could also cause development in the space, as better hardware and innovative cryptographic methods could stem from regulatory approaches with the aim of enhancing privacy and security. The downside may be that regulatory actions could cause a rift between the decentralization ideology cryptos are created for and the centralized custodial services of the traditional financial system. 

How do you think regulators will respond to the increasing demand for privacy and self-custody in the cryptocurrency community?

Regulators have a few options for this. First, regulators may embark on educational initiatives to enlighten the public on the best ways to secure their tokens and use privacy-enhancing technologies.  Second, startups and crypto companies may be allowed to test regulatory sandboxes for experimental purposes without full commitment to compliance requirements. This could help test privacy and self-custody solutions under supervised conditions. Another approach is to strike a balance between privacy and regulation. Regulators can allow privacy features in cryptocurrencies while balancing it with the mandate to enforce scrutiny in the case of illicit activities or terror financing. 

What impact could the increased political activism and organization within the crypto community, such as the formation of crypto-focused PACs, have on the legislative process?

Since Coinbase and its major campaign-finance partners, Ripple and Andreessen Horowitz, have thrown in about $161 million to spend on the 2024 US elections, the massive hurdle, the US legislature, has begun to change tune. Crypto-focused PACs are interested in growing the number of pro-crypto members, and that’s exactly what’s being done. It’s expected that the next Senate and House of Representatives will have more pro-crypto lawmakers than ever. This can only mean one thing: more crypto-positive laws or regulations.

Could the government’s increasing support for cryptocurrencies and blockchain technology lead to backlash from the traditional financial sector?

Traditional financial systems already see crypto as a threat. With government support, crypto may top the kill list. This may take several forms, including regulatory pressure by lobbying lawmakers, technological resistance by refusing to integrate crypto into their operations, imposition of barriers for crypto businesses to run on their platforms, and even PR campaigns to discourage the public from adopting crypto.