Johny Fernandez: For years, crypto and Washington were at war. Now they’re writing a rulebook together. The SEC and CFTC are drawing up crypto regulations, the GENIUS Act is taking shape, and a new Congress is right around the corner. So here to walk us through it is a man leading Coinbase’s policy fight around the world. Please welcome the chief policy officer at Coinbase, Faryar Shirzad. How are you?
Faryar Shirzad: I’m great. Thanks for having me on.
Johny Fernandez: Thank you for being here today. Yeah. So let’s go ahead and talk about the SEC and the CFTC, since they are actively writing crypto rules. So where does that progress actually stand today?
Faryar Shirzad: Well, it’s really exciting. It’s basically happening on, I would say, probably three tracks. The SEC has done two really important things. One is they put out this thing called Reg Crypto, and it essentially clarifies the rules around how you can raise funds off of a crypto offering. So these ICOs that you would think about, new token developers getting clear rules on how they can go to market.
The other thing they’ve done is to clarify the rules around the tokenization of the capital markets. So this innovation exemption has now provided a path for people to tokenize stocks, including NYSE itself, which has a project underway to do that. And so that’s been the SEC’s role. On the CFTC side, they’ve been trying to provide clarity to the crypto spot markets, but also onshore a lot of the derivatives and more kind of complex products that make up a big part of the crypto market share around the world. So huge momentum at both agencies.
Johny Fernandez: So let’s talk about GENIUS, because GENIUS is being implemented alongside Reg Crypto and the innovation exemption. So what do those actually unlock at the moment?
Faryar Shirzad: So what the GENIUS Act does is it creates a clear federal framework around stablecoins, dollar stablecoins. I think there’s a general consensus now that payments are going to be tokenized. They’ll occur in stablecoin form. Maybe they’ll occur in tokenized deposits. But the rails, the blockchain rails, are a better, more efficient way to move money. And what GENIUS does is it creates the rules around making sure that that money, the tokenized dollar, has integrity, backing, security, and all those things that you would expect of it.
The OCC, just last week, issued probably the most important of the implementing rules of the GENIUS Act. And the rules were excellent, clear. They very much reflect the will of Congress. And so we should see a dramatic upsurge in the adoption of stablecoins going forward.
Johny Fernandez: So we talked about this off camera, but Coinbase spent years fighting regulators, and now you’re working with them. So how big of a shift is this? I mean, especially, you know, we’re talking about how you’re flying, and there’s just a lot going on. So yeah, talk about the big shift.
Faryar Shirzad: Well, the big shift was really in the US. Under the Biden administration, we had this crazy dynamic where the Biden regulators were trying to drive the industry offshore. Even as that was happening, regulators around the world, in the EU, Singapore, the UAE, Brazil, I mean, you name the international market, were trying to work with us to try to figure out how to adapt and adopt this technology and create clear rules to protect consumers. What has happened since the election is we’ve been working with the SEC, the CFTC, the OCC, the Fed, and the FDIC in the same way that we’ve been working with global regulators, and working with Congress to try to get crypto legislation. And that progress has been excellent.
Johny Fernandez: So, taking a step back, what do you think is the most important progress for crypto this year?
Faryar Shirzad: Well, I just think the adoption has been the most interesting story. So policy really matters. That’s where I come into the picture. I’m trying to get the rules right. But I think the shift in tone in the US, and the progress around the world in recognizing that the future of the financial system is going to be built on the blockchain, has made this year a story of implementation: the dramatic upsurge in stablecoin adoption, the move towards tokenizing equities. All of that is happening this year. And the policy is actually driving some of it, but it’s also trying to catch up to some of it.
Johny Fernandez: And obviously, the year isn’t over. Midterms are just around the corner. So what do the midterms mean for crypto legislation, and what do you expect from Congress next year?
Faryar Shirzad: So, really exciting. With every Congress, we’re going to see even more pro-crypto members come in. So in the House, for example, we had 305 House members vote for the GENIUS Act, and something like 66, 67 in the Senate voted for the GENIUS Act. We had a significant bipartisan majority in favor of the CLARITY Act in the House. We weren’t able to get there in the Senate. I think with this Congress, we expect to have 10, 20, 30 more pro-crypto members in the House and the Senate. And the crypto voter is going to show up on Election Day and be decisive in a number of swing districts. So it’s going to be a continued evolution of crypto’s power in Washington.
Johny Fernandez: It’s going to be interesting to see what happens. Thank you so much for joining us today.
Faryar Shirzad: All right. Thanks, Johny.
