Advocating for digital assets is growing as new regulation looms large
- Global Digital Finance, the biggest digital assets and blockchain association in the world, engages regulators and policy makers to promote digital finance.
- While crypto will be more regulated, the industry is nervous about a lack of consideration for its unique position relative to traditional finance.
While digital assets are beginning to find a firmer place in consumers’ pockets and the economy at large, they’re still a long way from widespread adoption. The next steps toward that include the government and regulators.
Global Digital Finance brings together global experts to engage policymakers and regulators, advocating industry best practices. It is a non-profit organization focused on promoting principles of open innovation and open standards within the industry. Their advisory group members include specialists from regulators, governments, industry, and academia. Recently, the association merged with the Global Blockchain Business Council, creating the biggest digital assets and blockchain association in the world, as GBBC’s CEO Sandra Rose joined the GDF board as an independent director.
It is not uncommon for an industry to come together under a singular banner to deal with the government and other administrative bodies. It grants them strength through unity while streamlining communication and other advocacy efforts. However, while most industries form trade associations, what we have here is a newer phenomenon — a member association. So we ask, what’s the difference?
What’s a member association?
“Where trade associations have traditionally committed to the guilds, like the shoe or candlestick makers, and tried to defend their patch from a legal jurisdictional quality product perspective, the new member associations in digital are borderless and tend to be more inclusive,” GDF executive co-chair Lawrence Wintermeyer detailed in his talk at Tearsheet’s Bankchain Conference last week.
“If we look at the fintech and crypto space, it’s not just all of the early stage folks that we represent, but a lot of late stage folks too, in addition to institutions, regulators, and capital providers — there’s really an ecosystem focus.”
So, while trade associations typically are more exclusive, rigid, and quite narrow in their advocacy focus with policymakers and regulators, industry associations try to use the power of the community and the crowd to openly convene. Particularly in GDF’s case, it works to get the right policies for technologies to flourish and consumers to benefit — whether on behalf of an institution, a startup, or representing any of the other ecosystem constituents.
The most important role a member association plays is to understand and gauge the members’ priorities and create roadmaps to accomplish them — that starts with a lot of just listening. Through open dialogues and tools like surveys, these institutions rank the most important things that they need to be doing for their community. Secondly, a large chunk of their effort goes into advocacy and education — dealing with lawmakers and regulators.
The digital asset space is bound to be regulated, so for GDF, it means intermediating a principally decentralized space to make sure that the laws that are made are right for the industry.
There is unmistakable irony in the GDF being a centralized face for a decentralized industry.
Another element of its work is bringing the industry together on convergence standards. GDF has put together a range of different standards that help industry players, big and small, converge on some degree of interoperability.
GDF is funded by its members through an annual subscription model. Members join for a year for a particular program, like the conferences or the working groups that are going on.
“So typically, in most organizations in life, the distribution and funding are almost like a Pareto — 20% of the larger members typically fund a longer tail of smaller members, whether that is mature institutions, or in my case, startups,” Wintermeyer said.
Having said that, Wintermeyer argues there is an active funding problem in the industry, and the GDF believes it’s underfunded. That is certainly the case relative to the traditional banking industry, or the oil industry, he says. Additionally, advocacy efforts by the industry are too fragmented, which is detrimental in the early stages, as they focus on just getting the right messages across in a timely manner. Lawmakers and regulators really just want to know whether what the industry is doing is safe for consumers, if they can be trusted, and that there’s consumer confidence ultimately in what they’re doing.
Market adoption and regulators
The new US Infrastructure Bill can be seen as a step forward in crypto’s nationwide adoption. The industry, though, didn’t necessarily see it as such. It set off new debates over the definition of terms like broker and dealer, with many arguing the definitions under the new law are clunky and need to be changed. Wintermeyer, with his experience in advocacy and understanding of the law-making process, argues that just getting into the tax system is a win for the industry.
“Once you’re in the tax system, that’s actually the first step to the road of greater adoption. This is a good signal. You might not like the manifestation of that, but see, here’s the reality of how laws are made,” he explained.
“If you’re taxed, there’s a general consensus that you’re probably doing something okay in the system. So this is a good first step.”
13 years after its birth, the crypto industry has just entered its regulation stage of maturity. The ecosystem has thus far grown without the presence of traditional financial institutions, institutional capital, per se, or the government, demonstrating that, on some level, consumers find value in the products and services the industry offers.
The data to suggest that crypto has found someplace among American consumers is there. Getting that narrative across to policymakers, however, is the challenge, according to Wintermeyer.
The thing about influencing regulators, especially in the realm of digital assets, is that it’s not their job to be innovative. Their job is to broadly look at participants’ conduct and issue actions. The GDF is looking for other avenues to do business with the people who are captaining the system.
Where do we currently stand in crypto’s adoption cycle?
Wintrermeyer harkens back to Ronald Reagan’s “tax it, regulate it, and subsidize it” motto to gauge adoption. He thinks it’s a good model to work our way through the social anthropology of an economic system. Seeing as crypto is well on its way to being regulated and is already taxed, adoption is being encouraged.
“GDF has focused on very the wide global community standards on codes of conduct, which regulators really love, but can’t make a comment about it publicly, because they’ve got jurisdictional mandates, and they’re concerned about the liability. I mean, it’s as simple as that,” Wintermeyer said.
The regulator-regulated dynamic
Digital assets will be regulated — the industry, for the most part, understands that. The industry’s entire argument is that any regulations that come should allow the space to flourish and evolve.
“We just want meaningful regulation rather than something off of the shelf. If something worked in the analog community, it does not necessarily mean it will here,” Wintermeyer said.
Digital is borderless, and that opens up just another dimension to regulating it. Professionals expect additional thinking about the complexities that moving into a digital world presents to us, not just in financial services, with the transfer of value, but virtually everywhere — all paths of government, governance, and society. This is considered a key point of engagement by the GDF.
The GDF also understands involving regulators in the more technical back-office workings of digital assets is a key part of their work. There are active programs where the organization works with regulators on a quarterly basis to educate and help them get through the gnarlier things going on in the community.