Crypto industry looks to states to legislate around the blockchain

Blockchain Association Executive Director Kristin Smith joins Yahoo Finance Live to discuss crypto regulatory issues, bitcoin mining, investments, and looking to states to legislate around the blockchain.

Video Transcript

AKIKO FUJITA: Well, as federal regulators look to shape policy around cryptocurrency, some say lawmakers are rushing to get ahead, in some cases with help from the crypto industry. Lobbyists for crypto firms are expanding their footprint, and our next guest recently set up shop in Albany, New York in an effort to shape a slew of crypto-related legislation.

Let’s bring in Kristin Smith, Blockchain Association Executive Director. And, Kristin, it’s worth noting that you do represent more than 80 companies in the space. It’s an interesting strategy here, because we’ve been so focused on the federal side of things, which always takes a little longer to take shape. What’s the thinking behind going after state lawmakers or working alongside state lawmakers?

KRISTIN SMITH: Well, there have been some states that for a while now have been trying to move policies forward to make their state more attractive for both Bitcoin mining investment, but also other parts of the cryptocurrency industry. And a lot of the regulatory issues do lie at the federal level, but there’s a lot of work that the states can do to make it more attractive.

And so there have been a lot of individual efforts at the state level. And there are a lot of small organizations that have been working very hard. But at the Blockchain Association, we wanted to help contribute to this firepower and have decided to start with New York, just given that that is such an important state across the nation.

So really great to see sort of the competition among states to make it more attractive. And the process at the federal level is going to take some time. So if there are things we can do at the state level, we want to engage constructively there.

BRIAN CHEUNG: Yeah, Kristin, it feels like on Capitol Hill, there’s still a lot of kind of knowledge gathering that’s happening– so maybe a little bit faster moving can be done at a local level. But give us a little bit of insight into exactly what you’re talking about here. Let’s say, for example, in New York, what are the types of policies that you feel would kind of further accelerate the development and usage of Bitcoin in the Empire State?

KRISTIN SMITH: Yeah. Well, New York is an interesting state, because if you look at the local level, you have Mayor Adams, who’s incredibly pro-crypto. If you look at the federal level, you have Kirsten Gillibrand in the US Senate, you know, who is an emerging leader, along with several members of the House. The state level is a little bit of a mixed bag.

You know, we have a BitLicense in New York, which is a pretty robust process that really needs to be streamlined in order to allow more companies to have a BitLicense. Right now, that process is very long in order to get the right licensure. We’re also seeing some state legislators have concern about the energy consumption of mining and are moving quickly to pass bills.

So what’s going on with New York is actually more of a defensive play. But there are other members in the assembly that are interested in learning about this. I think that what’s the key to crypto policy, whether it be at the state level, or at the federal level, or even internationally is you can’t get good policy without having an informed policymaking community.

And so what we want to do at the Blockchain Association is work with local companies in New York and other stakeholders in the crypto ecosystem to make sure that policymakers, regardless of what level they’re at, to become more educated so that they can make sound policy choices. It’s when these things try to get moving quickly without the right background knowledge that we often have legislation or rules that have unintended consequences. So we would like to avoid that with New York.

AKIKO FUJITA: Kristin, how much of this localized approach is about trying to influence from the ground-up, to pressure lawmakers at the federal level– whether it is New York, or Wyoming, or a place like Texas– in many ways, we have seen in other industries, like marijuana, for example, where it is the local policy that shapes the federal policy ultimately. Because at some point, you’ve got enough states to have some type of guardrails in place.

KRISTIN SMITH: Yeah. Well, listen, it’s interesting, because most of on-ramps and off-ramps to cryptocurrency today are regulated at the state level with state money transmitter license laws. And those were sort of the early licensure that crypto companies would seek out. I do think that there is a case that there could be a federal alternative down the road.

This is certainly something that has been part of the discussion around how to regulate stablecoins. There are some issues, like when you look at securities laws, that really clearly do fall within the federal remit. But if you think about states like Wyoming– Wyoming was very, very pro-crypto early on. They’ve passed several bills that have become law that have really made Wyoming an attractive place for crypto companies to do business.

That has actually translated to the federal level because if you look at, like, Senator Lummis, for example, from Wyoming, she’s a huge fan of Bitcoin. And that’s because her local Wyoming legislature was interested in it first. And so a lot of it is about sharing awareness, about showing that there is political support. The crypto community, I think, is incredibly powerful in that they’re very organized, they’re very passionate about what they’re building, and they’re not afraid to pick up the phone and call their legislator, or their Congressman, or their Senator when something goes on.

And so I think that one of the most powerful things with the state is just bringing– helping to bring that education level up. Because oftentimes, it’s those state legislators that end up making their way to Washington.

BRIAN CHEUNG: All right, Kristin, and then lastly here, I want to ask about who else you’re engaging. Because as you’re kind of having these discussions at the state level, it’s more than just those legislators that you’re talking to. I imagine you want to engage with, for example, the Department of Financial Services on the regulatory framework there, as well as the banking– the state banking regulators on anti-money laundering, know your customer kind of rules there.

How difficult is that? Because you don’t want this patchwork to be put together where such the compliance in one state is going to be a little different than in a neighboring state, for example.

KRISTIN SMITH: Yeah, no, it’s a little bit daunting. I mean, you’ve got treasurers that are interested in getting involved. You’ve got attorneys general that need to have more education. You have governors– there are a lot of different actors, like you mentioned, within this state. And for us, we’re really starting with New York first at the Blockchain Association.

But as I mentioned, there is a wonderful network of smaller organizations within the states that have really been doing a lot of the work to date. And so we don’t want to compete with them. We want to support those efforts and coordinate with them. I think one of the things that’s great about the cryptocurrency industry is that for the most part, they’ve really sort of banded together and realized that we need to have as many people working on these issues as possible.

So it’s not a competition, it’s trying to figure out how we can add our policy expertise or some of the expertise with our membership to existing efforts that are really sort of organically being built up at the state level and be additive to that process and not try to replace the existing efforts that have been in place.

BRIAN CHEUNG: Kristin Smith, Blockchain Association Executive Director, thanks again for stopping by the show. We’ll talk to you again soon.

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