Crypto can’t keep up a united front in Washington

Crypto’s disunited front

In ditching the Blockchain Association, Binance.US said, “It’s time we had a clear voice.” But the weakening of the industry’s key lobbying group makes it muddier than ever to define who speaks for crypto in Washington.

The American arm of the world’s biggest crypto exchange now has to spin up its own government-affairs team — no easy feat when everyone else is trying to line up financial regulatory experts — at the exact moment when the industry is reeling from major regulatory challenges.

Good luck; have fun! Binance.US said it will do its own lobbying and set up its own team “to actively engage in direct and constructive dialogue with U.S. policymakers.”

• The Blockchain Association said it “wishes Binance.US the best of luck as they build out their operation in Washington.” Binance.US, which is technically an entity owned by Binance CEO Changpeng Zhao that leases technology from Binance, will need some luck, given its main partner’s troubled history with regulators globally.
• Binance has grappled with serious regulatory challenges worldwide, including in the U.S., Europe and Japan. (There was also the bizarre misstep this week that involved creating a Twitter emoji that looked like a swastika.) Setting up Binance.US as a separate company was meant to sidestep those troubles. In a further sign of its quasi-independent nature, Binance.US just raised $200 million at a $4.5 billion valuation.
• But Binance.US went on to have a bumpy U.S. debut marked by jarring leadership changes. Brian Brooks quit suddenly in August 2021, citing “differences over strategic direction.” His predecessor Catherine Coley had left in June, an exit that turned into a crypto-world mystery. Coley, a well-known figure in industry circles, has not been heard from since she left the company.

Crypto’s biggest players are going it alone. Losing a crypto powerhouse like Binance.US is another blow to the Blockchain Association, the 4-year-old organization that has played a leading advocacy role for crypto in Washington.

• The association’s decision to accept Binance.US as a member two years ago led to another major defection. Coinbase, the biggest crypto exchange in the U.S. and a founding member, ditched the group after its board voted to welcome its archrival. In a resignation letter, Coinbase’s board representative did not mention Binance.US but claimed the association was “not interested in the membership criteria we had worked to establish to underpin the mission of this organization.”
• In an interview with Protocol last year, Kristin Smith, the Blockchain Association’s executive director, said the board’s view was that “if you're a crypto participant company in the U.S. and you don't yet have any sort of major marks against you that it's better for us all to work together. Coinbase had a different opinion.” A Coinbase spokesperson declined to comment on whether the company would consider rejoining the association in light of Binance.US’ exit.
• The Blockchain Association, which has more than 80 member companies, “has been a great advocate on Capitol Hill,” Mike Fasanello, chief compliance officer of LVL, told Protocol. But the Binance.US and Coinbase defections underscore the challenges of keeping a united crypto front.
• It’s not easy to speak for an industry that is “so dynamic that the needs of market participants and therefore lobbyists change frequently,” Fasanello said. It’s “distinguished starkly from, say, the oil lobby, the gun lobby, the clean energy lobby.”

Whatever happened to peace, love and crypto? Sure, blockchains are decentralized, but community is supposed to be a big part of what makes crypto works.

• Ripple CEO Brad Garlinghouse recently blasted what he called “tribalism” around bitcoin and other cryptocurrencies. Ethereum and Polkadot founder Gavin Wood also spoke out against “crypto-nationalism.”
• Who did they have in mind? Well, Block CEO Jack Dorsey and investor Marc Andreessen caused a stir with their entertaining Twitter feud over what it means to be Web3. Dorsey has gone on to feud with Robinhood CEO Vlad Tenev and the backers of Ethereum blockchain projects, slamming anything that’s not bitcoin.
• When the Ukraine war started, many crypto companies and groups, including the Blockchain Association, pushed back on the argument that crypto can be used to avoid sanctions against Vladimir Putin and his allies. But some industry leaders, like Fasanello, criticized that position, saying it was “pushing a false sense of security.” Binance is now upping its KYC checks on Russian users as the EU and U.S. tighten sanctions and include crypto wallets on their entity lists.

Welcome to the disunited state of crypto. Crypto is going through raging debates on how products should be defined and how the market should be regulated. And big swings in digital asset prices continue to unsettle the market. “Until there is stability in crypto market value or in how crypto is used in the financial system,” Fasanello said, “uniformity within the lobby will not be easily achieved.”

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On the money

On Protocol: Anchorage Digital failed to comply with anti-money laundering rules, the Office of the Comptroller of the Currency found. The crypto custodian agreed to take corrective measures to strengthen internal controls.

Plaid’s co-founder built a bank. Well, sort of, if you don’t count the single-branch bank William Hockey bought for its charter and access to payment networks. Column will focus on serving financial-app developers, competing with fintech-oriented banks like Cross River.

PayPal is raising rates for instant transfers. PayPal and Venmo users will generally see higher rates, and the company is also lifting some fee caps.

Marqeta rolled out a new fraud-fighting service. Klarna is a customer for the service, for which “real-time decisioning” is a key feature.

PayU is expanding in Latin America. It bought Ding and led a $46 million round in Treinta, a Colombian financial super app.

Tron is getting its own stablecoin, with crypto reserves. Tron founder Justin Sun said USDD would be backed with $10 billion in crypto.

Commerzbank is applying for a crypto license from Germany’s BaFin. It’s seeking to offer crypto exchange and custody services.

Overheard

Old banking tech frustates entrepreneurs like Brex co-founder Henrique Dubugras. “Every time we partner with a bank, the bank can be a little bit better or a little bit worse, but they all use the same tech stack,” he told the Wall Street Journal.

Coinbase’s CEO isn’t completely happy with its NFT launch. “We're stuck in a web 2.5 world still, moving toward web3,” Brian Armstrongtweeted about the marketplace’s social component.

The chart

It hasn’t been an easy 2022 for Coinbase. Shares have dropped more than 40% since the beginning of the year. New product launches like the NFT marketplace haven’t done much to lift the stock, and its entrance into India turned into embarrassment when it abruptly stopped taking rupee deposits over the nation’s payments network. First-quarter results, set to be announced May 10, aren’t likely to provide much relief to investors, with the effects of the Ukraine war and gyrating crypto prices in view.

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