Regulation is Coming for Cryptocurrency

May 23, 2022
By Sarah Knakmuhs and Matt Reid

Regulation is likely coming, and quickly, to the crypto world. That sea change means how crypto will operate in the future is being determined right now, making communicating clearly and effectively today an absolute priority for companies operating in the space.

Earlier this year, President Biden issued an Executive Order calling for a multi-agency evaluation of federal crypto policy. That was followed by an announcement from Securities and Exchange Commission Chairman Gensler regarding regulatory efforts focused on areas such as expanding investor protections. Members of Congress from both sides of the aisle are also eyeing the need for legislation regarding the crypto market, and the same thing is happening in many state capitols.

The crypto considerations on the regulatory and legislative agenda include a wide range of areas in the space such as taxation, national security, innovation, and financial regulation. While the movement towards regulation is clear, what is less clear is how companies should communicate as various proposals play out in Washington, D.C., and other policy centers around the world.

At the same time industry players are (or should be) staking out their position in the fast-moving policy debate, they are also dealing with the dual challenge of managing a skyrocketing number of crypto investors/adherents and helping educate a large swath of the global public who are still learning about the industry. Digital currency (e.g., Bitcoin, Ether), nonfungible tokens (NFTs), trading platforms (e.g., Coinbase, Gemini), digital wallets – it is a lot to track if you are not in the industry.

Given the high stakes, rapid growth and intense scrutiny, crypto companies need to tell their own story. To do so in this crowded, charged, and noisy environment, there are some basic guiding principles for companies to follow:

Define what matters. With a wide range of potential regulatory proposals, companies do not need to have a voice on every issue, but they must be heard on what is most important to their businesses and stakeholders. For example, how taxation is structured is an issue that will affect most, if not all, companies in this space and staying quiet may lead to unintended tax consequences.

Target your audience. The crypto industry potentially comes under the purview of an extremely wide range of regulators (e.g., Securities and Exchange Commission, Treasury Department, Federal Trade Commission, and Department of Labor) but not every issue touches all the agencies. Determine what and who matter most and focus communications efforts to those audiences.

Develop the right messages. Don’t assume your positions, or even the issues, are fully understood by everyone. Your messaging needs to be easy to digest for all audiences, including those who understand the issues and those who do not.

Find your friends. Numerous companies and organizations are looking at the same uncertain regulatory landscape. Joining forces through one of the many coalitions and associations focused on crypto, such as the Digital Chamber of Commerce and the Blockchain Association, or aligning with companies with similar regulatory goals can help amplify messages and priorities.

Show you are part of the solution. Simply saying no to regulation will not make it go away. As regulators work to identify approaches and solutions, it is vital for the industry to provide clear feedback and alternatives to help answer regulatory concerns while not harming the industry.

Don’t be afraid to repeat. Communicating with a person or key stakeholder once is rarely enough. Do not be afraid to go back to the same people and deliver the messages repeatedly.

The time for the crypto industry to act is now. Regulation is coming in some form, and it will guide the industry for years to come. While communicating in the midst of this turbulent and uncertain regulatory debate is not easy, it is imperative for industry players to have a clear voice to help guide the ultimate shape and scope of crypto regulation. The future of your business depends on it.