Grewal is inspired by Asia’s quick embrace of crypto regulations, but remains optimistic about the U.S.
If crypto policy is going to succeed in the U.S. it needs to be a bi-partisan issue, bringing together both sides of the aisle, he argued.
At the Bitcoin Nashville Conference, the loudest and most thunderous applause came from Republican candidate Donald Trump’s promise to fire Securities and Exchange Commission chair Gary Gensler. Republicans have taken on crypto on as a pet issue, but Coinbase’s Chief Legal Officer, Paul Grewal, doesn’t want this to become a partisan issue.
“My number one concern is that crypto becomes politicized and becomes a partisan issue in ways that, at the very least, slow and perhaps even worse, threaten its continued growth and development,” Grewal said during an interview at the Asia Blockchain Summit in Taipei, emphasizing the need for bipartisan support for policy modernization.
Part of the need for change in the U.S. comes from a reliance on antiquated frameworks, like the Howey Test, to address the reality of twenty-first-century finance.
“There needs to be an understanding that the Howey Test was developed in the context of an Orange Grove real estate in Florida in the 1940s and 50s,” he said, arguing that applying the Howey Test “blindly and mechanically” to blockchains and crypto does not make practical sense.
“Precedents, even from the Supreme Court, have always been recognized as applying in particular contexts and needing to adapt to new technologies and issues that emerge in markets and in the economy more generally,” he said. “It’s important to respect precedents and to use the wisdom garnered from decades of applying them in all sorts of other contexts without being beholden to them in a way that just doesn’t make practical sense.”
Asia doesn’t have the same binding constraints as the Howey test, and Grewal appreciates how regulators are writing the rules from the ground up while listening to feedback from the industry.
After all, Hong Kong’s path to creating its digital asset license framework – and allowing crypto ETF issuers to offer in-kind redemptions, which the SEC prohibits – began with an announcement in the fall of 2022 that authorities in the city were reconsidering their stance on the topic.
“What is most inspiring to me here in Asia is that there’s a focus on discrete issues and almost no focus on ideology,” he said. “There is an interest in understanding the technology, where the industry is headed, and our experiences…because they want to learn and take the best, while avoiding the worst.”
In contrast, within the U.S. it has been a challenge to have “meaningful dialogue with large chunks of the government when it comes to crypto and policy,” Grewal opined. However, he remains optimistic about America, as both major political parties are beginning to recognize the significance of crypto.
“Crypto, at the end of the day, it’s code. There are plenty of other issues in the United States and all over the world for us to disagree on. We should be able to agree on what code does and how it operates,” he concludes.
