Where Is Crypto Policy Heading in a Post-FTX World?

Among some crypto journalists, there is a sense the ongoing criminal trial of disgraced FTX founder Sam Bankman-Fried may be the last great crypto trial. FTX’s implosion, and the subsequent market contagion and negative feedback loop of media coverage it kick started, has done the blockchain industry irreparable damage. The size of the estimated losses to FTX investors and users would, if convicted, place Bankman-Fried among the largest financial frauds in history. And, as many said, for better or worse, crypto is on the stand alongside him.

This op-ed is part of CoinDesk’s State of Crypto Week sponsored by Chainalysis.

Still, for many crypto policy experts, the worst effects of FTX may already be behind this mercurial industry. According to two industry lobbyists based in Washington D.C. who could not go on the record, November and December of last year were likely the darkest months crypto will see, in terms of a backsliding political landscape. “For lawmakers who didn’t have an opinion or hadn’t made up their minds on crypto, FTX forced them to have an opinion,” one lobbyist told CoinDesk. The outlook wasn’t good.

These were the months when what some now refer to as “Operation Choke Point 2.0” came into focus. President Biden’s earlier commitment to taking a “whole of government” approach to managing crypto began to mean siccing the full force of the U.S. regulatory apparatus against this nascent technology. Within the span of weeks, the Federal Reserve, Treasury Department and the nation’s foremost finance and banking overseers seemingly did what they could to stifle the industry in the immediate aftermath of FTX’s collapse.

Bank accounts were closed. Working agreements were scuttled. And major lawsuits were filed. Two of the most important crypto companies, Binance and Coinbase, were accused of illicitly offering securities. U.S. Securities and Exchange Commission (SEC) Chairman Gary Gensler spoke before Congress as the legislative body ramped up efforts to pass crypto-appropriate rules it has spent years putting off, advocating for a licensing system that crypto critics and proponents agree would be unworkable.

While the U.S. government has floundered on creating clear rules of the road for crypto, jurisdictions across the globe have passed comprehensive…