Welcome to Washington, cryptocurrency believers. It may be wise to stick around.
On Wednesday, in a landmark event, half a dozen crypto executives—Circle CEO Jeremy Allaire, FTX CEO Sam Bankman-Fried, Bitfury CEO Brian Brooks, Paxos Trust CEO Charles Cascarilla, Stellar Development Foundation CEO Denelle Dixon, and Coinbase CFO Alesia Haas—testified before the House Financial Services Committee.
The four-and-a-half-hour-long hearing was anything but the thunderdome-like throwdown that was expected between the burgeoning industry’s champions and lawmakers looking to extend the federal government’s oversight of the sporadically regulated crypto markets. Instead, in many ways, it marked the crypto industry’s coming-of-age.
Lawmakers have long scoffed at the widely used talking points about crypto’s potential for creating a more equitable global financial system. Parts of Wednesday’s hearing struck a different tone, though. While both sides showed moments of tension and skepticism with the other, there were also plenty of signs that crypto, in the eyes of many in Washington, D.C., has shifted from the theoretical to the unavoidable.
“I came in expecting some hostility and grandstanding, but instead found the discussion to be by and large productive and helpful,” FTX’s Bankman-Fried tweeted late Wednesday afternoon. “I’m excited to keep engaging with lawmakers and regulators to refine the regulatory landscape.”
Crypto executives have, for some time now, seen the writing on the Capitol’s walls that stricter oversight is coming.
In anticipation, the industry has been beefing up its brigade of lobbyists and trade organizations, an effort that is seemingly proving worthwhile already. (Remember the crypto provision in the infrastructure bill?)
And yet, for as much progress as it represented, Wednesday’s hearing only marked an opening salvo.
Next week, the Senate Banking Committee will host a hearing on stablecoins, a topic that was recently the subject of a report from the President’s Working Group on Financial Markets. Dawn Stump, a commissioner with the Commodity Futures Trading Commission, recently told the Financial Times that the derivatives regulator needs to do a better job of clearly stating its expectations for crypto exchanges. And then there’s the question of what the Securities and Exchange Commission will do next.
Crypto-trading service Coinbase may still be holding out hope that Congress opts to create a third U.S. market regulator, which it proposes would oversee all digital asset regulations and therefore offer a more streamlined set of rules. But the SEC, led by Chair Gary Gensler, has given few signs of backing down from a push to oversee the crypto world. Just a week ago, Gensler ramped up the pressure by calling for the industry’s gatekeepers—lawyers, advisers, and accountants—to make sure their clients’ businesses are compliant with the SEC’s current rules when applicable.
In other words: Get comfortable, because D.C. is just getting started.
Declan Harty
@declanharty
Declan.harty@fortune.com
DECENTRALIZED NEWS
Credits 🚀
A former casino analyst wants to open a New York area casino that would include the world’s largest crypto trading floor… NFT marketplace OpenSea has named long-time Lyft executive Brian Roberts as CFO… Kickstarter is kicking off a new crypto effort with a blockchain-based crowdfunding platform… MicroStrategy can't stop buying up Bitcoin... Florida Gov. Ron DeSantis wants to let businesses use crypto to pay state fees... Ritholtz Wealth Management and WisdomTree are creating a new crypto index… As is FTSE Russell… Jump Capital has led an $8.5 million strategic investment in DeFi futures and options exchange Zeta Markets… Visa has launched a new crypto advisory practice… Australia wants to bring crypto “out of the shadows”... The CIA is dabbling in crypto… Pantera CEO Dan Morehead is worried about how bond investors will fare when the Federal Reserve stops supporting financial markets while saying crypto is the way forward.
Debits 🐻
It’s been a rough week for the crypto markets… Bitcoin was down more than 15% over the prior seven days, as of mid-day Thursday. Solana dropped 21%. And Cardano was down more than 24%... Charlie Munger wishes crypto had never been invented… New York Stock Exchange president Stacey Cunningham is stepping down… President Joe Biden’s pick to lead the OCC, Saule Omarova, has withdrawn from consideration… A Miami jury has handed down a mixed verdict in the civil case involving Craig Write and former partner Dave Kleiman… Deutsche Bank may have violated a criminal settlement related to its sustainable investment business… Federal regulators are asking questions about former President Donald Trump’s SPAC deal… One of the original meme stocks GameStop struggled in its latest earnings report.
FOMO NO MO
Meet fintech's favorite banker. For more than 20 years, Steve McLaughlin has been working behind the scenes on some of the biggest deals in financial technology. Lynk Systems. Revolut. AvidXchange. Marqeta. McLaughlin, a former banker at Goldman Sachs, has been involved in them all. Now, at a time when fintech deals are hotter than ever, business at McLaughlin's firm, Financial Technology Partners, is going gangbusters, according to The Wall Street Journal, which recently profiled McLaughlin.
From the article:
Compensation of deal makers is as hazy as it is large—millions here, millions there. But Mr. McLaughlin’s peers and competitors agree that, as best as anyone can reckon, he is comfortably the highest-paid investment banker in America.
His firm, Financial Technology Partners LP, is on track for some $600 million in revenue this year, according to people familiar with the matter. Valuations of similar listed firms would peg its worth at $2 billion or more. Mr. McLaughlin owns it all, having doled out none of the firm’s equity to its 225 or so employees.
Its playbook combines the advice-giving of traditional investment banks and the motivated profit-seeking of private equity, with fees that often ratchet up as a percentage of the sale prices it fetches for clients. And Mr. McLaughlin has also invested personally in companies he advises, with stakes in just two of them, AvidXchange Holdings Inc. and Marqeta Inc., worth more than a combined $350 million, according to securities filings and people familiar with the matter.
BUBBLE-O-METER
26%
Americans are warming up to Bitcoin—slowly. In 2020, Grayscale Investments found in its annual Bitcoin investor study that 23% of U.S. investors owned Bitcoin. And this year, the number inched higher to 26%. Interest is climbing, though. More than half of the current investors in Bitcoin surveyed by Grayscale reported to have bought in within the past year.
THE LEDGER'S LATEST
Bitcoin miners have returned to the record activity they had before China's crypto crackdown—but they are still looking for a home by Sophie Mellor
It’s not a great time to be a SPAC or a meme right now by Jessica Mathews
Bitcoin’s weekend carnage sends jitters through the crypto markets by Sophie Mellor
Here’s how to buy digital real estate in the metaverse by Marco Quiroz-Gutierrez
Ethereum update defuses ‘difficulty bomb’ that could have stopped Ether crypto mining by Chris Morris
Beijing and Washington grapple with crypto in their own unique fashion by Christopher O’Brien and Chris Boone
Terra’s Luna coin surges past Dogecoin, Shiba Inu, and Avalanche to become world’s 10th largest coin amid crypto selloff by Yvonne Lau
(Some of these stories require a subscription to access. Thank you for supporting our journalism.)
MEMES AND MUMBLES
Dropping $450,000 in the metaverse like it’s hot. Snoop Dogg has been a well-documented crypto fan, especially in NFTs. So, news that the rapper is building a version of the metaverse called the Snoopverse with the help of Ethereum-based The Sandbox should not be surprising. But what may be is the fact that someone dropped $450,000 for “land” in the Snoopverse. (To put that into context, the median home price in the U.S. is $404,700.) All of it begs the question: Will we be able to mortgage our metaverse mansions?
This is the web version of The Ledger, Fortune’s weekly newsletter covering financial technology and cryptocurrency. Sign up here to receive future editions.
