Mick Mulvaney served as acting chief of staff to President Donald Trump and acting director of the Consumer Financial Protection Bureau from January 2019 to March 2020. Prior to joining the Trump administration, Mulvaney represented South Carolina's 5th Congressional District in the United States House of Representatives from 2010 to 2016. Among his current roles, Malvani is a strategic advisor to Zurich-based Astra Protocol, a Web3-focused decentralized compliance suite. Products in the cryptocurrency sector.
In this discussion, Mulvaney shares his thoughts on the future of cryptocurrency regulation and how the new Congress and the executive branch can work together to protect the development of new technologies.
Forbes : What do you think of the White House statement in late January accusing Congress of not taking action on cryptocurrency legislation?
Mick Mulvaney: This is completely understandable. There is always conflict between the powers of government. And while management might feel guilty for saying the FTX thing, I don't think so, but if they knew they were, they might try to blame someone else. The natural "other" to the executive is the legislature. Now, if the Legislature holds itself accountable for this, they say that it is really the fault of the administration. So I don't think it moves the needle one way or the other. It's just another day in Washington, D.C. I believe there is some truth to this, however, Congress is the ultimate authority. This is how the constitution was established especially for such cases. Congress did not provide as much guidance as it otherwise might have, forcing the administration to do something. Of course, this exposes the administration to criticism if people do not like what the administration is doing. So it is part of natural stress.
I think the bottom line is that the legislature and the executive are interested in advancing cryptocurrency and blockchain regulation. If you are considering a new industry, regulation always follows innovation. Therefore, the industry creates more innovation than the government can control. It's not new. This has been around since the advent of steam engines. So the tension is natural. I hope the tension leads to more common sense on the regulatory front rather than something completely reactive and destructive.
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Forbes: When you say the executive branch may be trying to pin the blame, are you pointing directly to Biden or more criticism of Gensler because he's a Biden appointee?
Mulvaney: It's a management person. It is and everything flows. There's a reason Truman has something on the table that says the dollar will stop there. So if Gensler gets criticism, Biden gets criticism. You don't have to split your hair between these two things. The administration is the political guilt Biden runs the city. I don't think they fell asleep at the wheel. I don't blame Sam Bankman-Fried (SBF) and FTX. For the purposes of this discussion, let's assume that all the allegations are true. The SEC is not responsible when people violate the law. People break the law because people break the law. Enron was in a regulated industry, it was still a fraud. Madoff was still in a regulated industry. He still committed fraud. Just because you have rules doesn't mean people won't cheat. I don't think people are blaming the SEC for what happened to FTX. Or at least it shouldn't be. As long as the allegations are true, they should blame SBF and others on FTX. Washington likes to look for scapegoats. But I think we are often too quick to blame one or the other part of the government for the actions of individuals.
Forbes: What do you think of the White House executive order a year ago that plans to create a strategy for the adoption of blockchain and digital assets in the country?
Mulvaney : I wish I could take the credit. I thought it was a nice touch between them to try and bring something consistent to the industry. The government should realize that this industry is a new industry comparable to the creation of the Internet. Now I am specifically talking about blockchain. In the early days, the government was very successful in not shutting down the internet. And I hope that the government will do a better job and not destroy the ban in its infancy.
Forbes : I'd be interested to hear your thoughts on processes or methods that turn that into action. The first step was to ask key leaders such as the Treasury Secretary, Attorney General and Director of Science and Technology to draft advisory notes to the White House outlining the main risks and opportunities associated with introducing digital assets in the country. . I'm not sure we went much further than that.
Mulvaney: That's a really good question about how executive orders work in people's minds, because sometimes the press suggests that it's the government by executive order. The president can somehow issue an executive order, and that's the law. And of course nothing could be further from the truth. It will provide guidance and management advice to various executive agencies for formal implementation of this initiative. The executive cannot legislate. Therefore, it is not a provision that makes the law. Basically, what it does is tell the various agencies to do what they can to achieve the desired goal. Go ahead and learn how to do X. How will this happen? They must apply the law to the administrative process; They need to find a law that gives them the authority to do something, including making laws or regulations. This movement works in parallel, independently and outside of Congress. Congress may enact legislation at any time to change the powers of executive agencies. And finally the law carries more weight than rules and regulations. The hierarchy is Constitution One, Law or Law Number Two, Regulation, Regulation, etc. 3-4-5 on the list. Then the agencies go and see what powers they have under existing law and issue rules and regulations based on that law. But Congress can change the law at any time. And the law can change anything from the authority of the agency to the authority of which agencies. So Congress could pass a law that says we're going to have one regulator of digital assets, and for the sake of argument, it's going to be the CFPB. This takes precedence over all others. They haven't done it yet. But they did. It changes the way agencies work in relation to regulation and regulation. Congress can deny the SEC any jurisdiction over digital assets. It could also give the SEC special rights to regulate digital assets. So the two work together. They may be working toward opposite ends: the executive agency is trying to do X, while Congress is trying to do Y. The question is who will do it first.
FORBES: When do you think it would be appropriate to create a new subcommittee, such as a new body focused on digital assets or a single issue?
Malvani: I think the right time to create a new sub-committee is when the issue has reached a point where it needs attention and it cannot be divided by other sub-committees. So I thought it was about time. I think it reflects where the world is going, where the digital economy is going. You have this special subcommittee because you have a new area that needs a lot of attention. And people should spend most of their time focusing on this area. In fact, I thought it was a good decision.
Forbes: What do you think of the new subcommittee chair? Congressman French Hill (R-R)
Mulvaney: Excellent choice, probably one of the most valuable members of this committee. He has experience in finance and banking. That is why it is highly valued. It is very flat and even bent. You make a great subcommittee chair for several reasons, but one of them is that everyone respects your opinion.
Forbes: What would you like the subcommittee to focus on first?
Mulvaney : Compliance, because that's what makes blockchain and cryptocurrency real. This is what allows blockchain and cryptocurrencies to mature. This is what allows blockchain and cryptocurrencies to become part of the larger economy. Brings it into the family so to speak. Traditional finance will never happen. This is not traditional finance. But you can join the larger economy by following some of the same rules of thumb that apply to traditional finance. It increases people's confidence in the system, increases the ability of financial institutions to use the asset class. It can allow the industry to mature and I think it's a very important and inevitable next step.
Forbes: Could you explain a little bit more about what you mean by compatibility?
Mulvaney : Crypto, blockchain, NFT will never become mainstream until they meet AML requirements, KYC/KYB requirements, until they start to resemble traditional finance. It doesn't have to be like traditional finance, but it should look like traditional finance and have the same protections as traditional finance.
Forbes: Do you think cryptocurrencies need separate laws?
Mulvaney : That's a good question. It also exists in other countries to some extent. For example, I remember in 2013 when I was on the Small Business Committee, when I started researching cryptocurrencies, I realized that the German government made cryptocurrencies their asset class. Not sure if it's safe? Is it a commodity? What is this part of the argument and the Germans put their hands up and say, you know, what, this is their thing? And we write special rules for this; We do not try to force you to accept outdated interpretations. It's new and we're going to treat it like new. And they make laws accordingly. So I think the answer to your question is probably yes, yes. It's his thing. So maybe you need your own rules and therefore your own rules and regulations.
Forbes : Are there laws that you feel are well-positioned to bring this transparency to the industry?
Mulvaney : I support efforts to bring it under the CFTC (Commodity Futures Trading Commission). As a moderator, I think it's helpful to have non-opinionated moderators. For example, it is important for referees to call balls and kicks, not favor one or the other. And I don't think Gensler has that kind of credibility. Gensler doesn't like the industry. This is not the attitude I would expect from a supervisor. I don't want an umpire to pick winners and losers, I want a umpire to call balls and strikes. And that's why I think the SEC would be the wrong choice at this point. But I think the industry will get a fair deal and strike a better balance between efficiency and innovation at the CFTC than at the SEC.
Forbes: Your feelings about Gensler clearly indicate that you don't think he's realistic right now. But I think you will agree that such a law will set the table for years or decades. There can be a new SEC in two years when there is an election if there is a new president. At this point, do you think the SEC could be any better?
Mulvaney : That's a good point. I'm in the category that doesn't believe this is a guarantee. I am a German model. I'm not sure if it's merchandise, but I'm sure it won't be. So between the two of us, I'm defending the CFTC on this one. Your question is good, that is, if the SEC and CFTC were in the middle, where would you choose to look? At the end of the day, I still think CFTC is better because I think the asset is closer to the asset, even though I know it isn't. Arguably, it is closer to being a commodity than a value.
Forbes : What are your thoughts on the SEC's series of enforcement actions, such as the shutdown of stock service Kraken and the recent lawsuit against Terraform Labs (creator of the TerraUSD/LUNA system)?
Mulvaney: The SEC's overall stance comes as no surprise. I think it's probably fair to call them skeptics. You have long been among the harshest critics in this space. At the same time, I am not too negative about it, because I think that many people who are eager to mature for the industry will accept the process of getting rid of this bad apple. In the year There are parallels between the dotcom boom and bust in the 2000s that you see in cryptocurrencies. What we have seen since 2000 are real companies like Apple, Google, Facebook and Amazon.
Forbes : How much pressure do you think regulators like Gensler are under because of all the media attention?
Mulvaney: I don't think it makes as much of a difference as people think. Regulators really hate bad press. But at the end of the day, as long as you please the leader of the White House, you'll be fine. It could be tough for 30 seconds or two minutes in a Senate hearing or something. But it's not the end of the world. So no, I don't worry too much about them.
Responding to public pressure, I am more concerned that legislators do this. I think you've already seen it. You've probably seen lawyers who don't know much about crypto come in and say, oh, I think we should ban it even though they don't know much about it. But they heard the complaints of their citizens in the country and decided to please them. I care less about bureaucrats than elected officials when it comes to knee-jerk reactions to public pressure.
Forbes: In this fraught political climate, some are wondering if Congress will be able to pass legislation. On things like raising the debt ceiling, cryptocurrency seems pretty low on the totem pole. What is your view?
Mulvaney : There are three areas where the current legislation is going through Congress because there is broad bipartisan interest in this issue and it's not politicized. It's not Republicans vs. Democrats, that is, there are parties on both sides of the issue. The first is his antipathy towards China. Then you see Chinese law and you see Chinese law. That's why 100 Democrats voted to create the commission to block oil sales to Chinese companies. Number two is big tech, Google, Facebook, etc. There is a bipartisan distrust of them and I think they will see legislation in this area. The third is blockchain, cryptocurrencies and digital assets. There are Democrats/Republicans who support; Democrats and some Republicans oppose it. But it is a formula to implement the law. Because people pay attention now. I know McHenry thinks it's the only thing he can pass as a committee this year because Democrats want to do something too. So there is a center of gravity on Capitol Hill behind doing anything about crypto/blockchain in this Congress. For that reason, I think it's on the short list where you see legislative benefits.
Forbes: What's your best-case scenario for all of this?
Mulvaney: You'll never find the best, which is a single controller. Which never happens. This is not how the federal government works; The economy is very complicated. The politics of Washington, DC are very complicated. When you say there's one regulator, what you've just done is deprive four or five other regulators of some authority, some power and some money. It also stripped congressional committees of some of their power and influence. I want to tell how this works and how we can adjust the system and get the right result. I don't think you understand. Rather, I think the goal should be a guideline that allows for some consistency. People use the word security and I think it's a misnomer, especially in a new industry. And you get federal priority so you don't have to deal with 50 different regulators. Five is one thing. 50 is another. So if he can do that, it's a big achievement for the industry. And I think there's a chance that will happen before the end of this term in Congress.
Forbes: Thank you