TD Cowen warns crypto companies themselves may push laws that 'derail' crypto industry as a whole

Quick Take

  • A report from the investment bank TD Cowen explains how clearer cryptocurrency legislation can “derail” the industry, as seen previously with the cannabis industry. 

The investment bank TD Cowen sees potential disruption in the cryptocurrency industry based on regulatory efforts. 

The crypto industry is on track to see stablecoin legislation this fall and broader crypto market regulation within the next two years. However, legislation that moves from the bigger picture to specific company interests can "derail" the industry, as seen previously with the cannabis industry, writes Jaret Seiberg, financial services and housing policy analyst TD Cowen Washington Research Group

The report argues that industries usually unite when pushing their legislative agendas, supported by coordinated lobbying. However, when Congress starts paying attention to a specific industry, companies begin to focus on legislation that benefits them individually. This forces lawmakers to choose sides within the industry, weakening the industry's overall progress.

Seiberg noted that such splintering occurred with the cannabis industry. Once unified in its bipartisan push to let states decide whether to legalize marijuana, the industry lobbying efforts broke off to include niche interests in proposed cannabis bills. 

"Navigating this evolution from legislation that can't pass to legislation that looks like it will pass, in our view, is now the crypto industry's biggest Washington challenge. Companies may decide the stablecoin bill is not needed or would benefit rivals too much," Seiberg wrote. "That could derail the stablecoin bill this year, which would then rob the market structure bill of momentum going into 2025."

"We also believe there is a risk that industry demands for the market structure bill will splinter as entities could use it to undo SEC enforcement actions or to dictate how specific tokens could be regulated. Disagreements in this space make it much easier for lawmakers to conclude the bill is not yet ready to pass," he added. 

On May 22, the House of Representatives passed the Financial Innovation and Technology for the 21st Century Act, or FIT21, a crypto legislation bill that included rule-making for stablecoins and anti-money laundering. 


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About Author

MK Manoylov has been a reporter for The Block since 2020 — joining just before bitcoin surpassed $20,000 for the first time. Since then, MK has written nearly 1,000 articles for the publication, covering any and all crypto news but with a penchant toward NFT, metaverse, web3 gaming, funding, crime, hack and crypto ecosystem stories. MK holds a graduate degree from New York University's Science, Health and Environmental Reporting Program (SHERP) and has also covered health topics for WebMD and Insider. You can follow MK on X @MManoylov and on LinkedIn.

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