The risks of regulatory capture are twofold: First, the public interest is shut out from policy-making in favor of a single industry or company, and second, it can make regulators blind to or paralyzed by economic risks. Now, not even three months into Trump’s presidency, American lawmakers and industry crypto observers have voiced concerns that this regulatory capture could not only negatively affect the country but curb competition within the crypto industry as well. Regulatory capture in the battle for crypto policyIn a March 28 letter, prominent members of the US Senate Banking Committee and Committee on Finance addressed Acting Comptroller Rodney Hood and Michelle Bowman, Chair of the Federal Reserve Board of Governor’s Committee on Supervision and Regulation.
The letter specifically addresses the launch of USD1, a stablecoin project from the Trump family’s decentralized finance project World Liberty Financial (WLFI), as Congress considers GENIUS Act legislation on stablecoins. Related: Trump’s crypto project launches stablecoin on BNB Chain, EthereumThe senators suggest there are opportunities for regulatory capture and conflict of interest.“President Trump may review any actions the OCC takes with regard to USD1’s stablecoin application.
Regulatory capture is old hat in Washington lawmakingDifferent lobbies influencing policymaking in Washington are nothing new, so much so that “regulatory capture” to the layman would seem to describe business as usual. Selgin said that the Biden administration’s approach to crypto was equally an example of regulatory capture, just in favor of traditional financial firms that, with their lobbying efforts, wished to limit competition from industry upstarts. “Regulators' relatively hostile stance toward crypto [under Biden] was no less evidence of regulatory capture than their more indulgent stance toward it today.
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