Crypto’s Regulatory Deal With the Devil

One of the most disgusting aspects of the American government (and there are many) is the revolving door between regulators and the regulated. 

An individual could one day be walking the halls of the Department of Defense as a government employee and the next as a lobbyist for a defense contractor. 

Or, as seen in a recent study, between 2004 - 2020, 32% of FDA employees left to go work in the very industry they were regulating. For the CDC, that number was 54%.

It’s simple…

• Put in a few years intensely (one might say, overly) regulating an industry by creating impossible to follow rules that force companies into fault…

• Then go work at that company to maneuver those same convoluted laws that you put in place.  

And while large companies can pay for this protection racket by either hiring these previous regulators or the law firms they now work at, smaller companies can’t compete. Roman from Tornado Cash, for example, has had to resort to asking for donations for his legal defense.

The entire ethos of crypto is to give back the power to the individual, yet here we are as an industry having to contend with the very same issues.

Case in point: Last week, Ladan Stewart, an 8 year SEC veteran who led the SEC’s crypto enforcement unit, has left the agency to join the law firm White & Case.

While at the SEC, Stewart litigated against companies such as Ripple and Coinbase. Now, she will be a partner in the law firm’s white collar division where she will develop a crypto defense practice.

Talking to Bloomberg Law, Ladan said:

Oh, the hypocrisy!

And in the press release announcing her hiring, Joel M. Cohen, Global Head of White & Case's Global White Collar Practice stated:

Ladan joins a cadre of previous SEC officials now working for the crypto industry. Steven Peikin for example was previously co-director of the SEC's Division of Enforcement from 2017 to 2020 and now represents Coinbase on behalf of Sullivan & Cromwell.

Conflicting Feelings

We want the crypto industry to be provided fair rules and regulations that they can adhere to. Instead, the companies face regulation by enforcement, or worse, vindictive lawsuits.

But for an industry that supports the opting out of the traditional financial system, we are having a very hard time opting out of the rent-seekers system.

Once again, the regulators aren’t doing what is best for the consumer, but what best lines their pockets. And crypto is having to contend.

Over time, this regulatory capture will result in a poorer outcome for the consumer. Remember, SBF was within inches of having his way with regulators.

We don’t blame Coinbase and other companies for having to play the cards they are dealt. But, we can and should point out the issues with it.