A crypto regulatory sea-change is brewing

Crypto Uncomplicated is a free crypto newsletter distilling all the happenings in the crypto space. Unlock the full experience as a premium subscriber by signing up here.

Last week, premium subscribers learned more about Thorchain, a crypto project that's up 70% on the year, and were the first to get in on the 40% surge in Terra since Zack wrote about how the crypto project is revolutionizing stablecoins back in February. Upgrade now!

In a mere span of days, two G7 countries took some pretty shocking steps to signal a warming attitude towards crypto in order to possibly attract the job talent that comes with it.

This week, it could be time for the US to make its case, too, as Treasury Secretary Janet Yellen is set to deliver her first speech focused mostly on digital assets.

Secretary Yellen, once known for her firm anti-crypto stance, will be playing catch-up if she uses the occasion to further warm up to the sector. Just last week, a special task force that had been set up by Japan's Liberal Democratic Party doubled down on the importance of focusing on the space by advocating for the creation of a special post dubbed "web3 minister" to oversee innovation tied to the booming NFT space.

According to CoinChapter, Japan wants to lead in NFTs, or what they call the "new growth engine." Another article translated the task force's takeaway as an urge to “take the initiative” to help Japanese businesses establish global standards in the space.

And just days after, Britain said, "Hold my pint" with more ambitious NFT plans of their own. The head of the Royal Mint, the producer of British coins, unveiled plans to make its own NFT in the coming months. According to John Glen, minister and economic secretary to the Treasury, the move is an "emblem of the forward-looking approach we are determined to take."

The second shot heard 'round the world (too soon for Revolutionary War jokes?) also came as regulators in Britain signaled a warming to embrace stablecoins for payments. "The government will introduce this legislation as part of an ambition to deliver a world-leading regulatory regime for stablecoins," Glen said.

Meanwhile, back here in the US, regulators have been intensely scrutinizing stablecoins for their potential risk to the traditional banking system. At their core, you could see the connection quite easily: Stablecoins are crypto tokens that are meant to be swappable for $1. They are the on- and off-ramp between crypto and the traditional fiat world. One fear regulators have is that too many people rushing to swap stablecoins for dollars (or vice versa) could put extreme stresses on individual operators (similar to a bank run.)

So far, the major stablecoins have functioned as they've been designed, but both Fed Chair Jay Powell and Secretary Yellen have repeatedly cited stablecoins as the biggest threat to watch when it comes to systemic risks spilling over beyond the crypto sandbox. Other politicians have cited criminal activity tied to crypto (which is equally represented in cash, if not more so.)

IMHO: Janet Yellen is both America's most accomplished economist and most lovable figure in government. Her views on crypto have evolved. She stays just as lovable. Long live that woman. (Source: Getty Images)

But, if Japan and the UK are already warming to seeing crypto as less of an economic threat and more of a technological boost, does that force America's hand? It kind of seems that way.

At the beginning of March, President Biden signed an executive order to further explore cryptocurrencies. It was equal parts economic threat and equal parts technological boost. I mean, these were right next to each other in the bulleted list:

• Mitigate the Illicit Finance and National Security Risks Posed by the Illicit Use of Digital Assets

• Support Technological Advances and Ensure Responsible Development and Use of Digital Assets

Use them ... responsibly!

But even that from the White House was a wild step in the right direction. (Keep in mind Trump called Bitcoin a "scam" as early as last year. And while I'm at it, Sen. Elizabeth Warren likened buying bitcoin to buying "air" as early as ... *checks notes* last week.)

Not to overstate things, but Yellen's speech on Thursday has the potential to be another huge step in clarifying what regulators, and indeed, government officials at the highest level are trying to do when it comes to embracing or hamstringing crypto.

Even if slightly, Yellen has already signaled a slight hint of optimism. A couple weeks ago, Yellen even said, "innovation in the payment system can be a healthy thing." Compare that to her remarks on bitcoin in 2018: "I will just say outright I am not a fan." (She also blasted it as being connected to crime.)

With all the pieces coming together, and pressure from the other G7 countries looking to make their economies a friendlier place to operate, it will be exciting to see what Yellen has to say this time. She's set to speak at American University in Washington, D.C. at 10:30 a.m. ET.

Just to remind pro-crypto readers who have gotten their hopes up before, only to be let down, I leave you with the wise words of a President past. Maybe we won't get fooled again.

"There's an old saying in Tennessee — I know it's in Texas, probably in Tennessee — that says, fool me once, shame on — shame on you. Fool me — you can't get fooled again.” - President George W. Bush

Thanks for reading! You made it all the way through! Sign up for a free, 7-day trial to see all of Zack's paid posts.