Crypto in Congress: Kristin Smith, Executive Director of the Blockchain Association
The importance of grassroots advocacy, how political fundraising works, and the changing crypto policy landscape in DC.
Hello!
The seventh episode of HODLpac’s Crypto in Congress interview is available now.
This week, Kristin Smith - executive director of the Blockchain Association and cofounder of HODLpac - talks about how the policy advocacy scene in DC works, the importance of PACs and grassroots advocacy, and the changing crypto policy landscape.
You can also listen to it on Apple Podcasts and Spotify or read the transcript below.
Enjoy! And be sure to visit www.hodlpac.org to learn more about how to get involved with HODLpac - a community-governed political action committee dedicating to supporting champions of crypto-friendly policy in the United States Congress.
HODLpac:
Hello and welcome to HODLpac’s Crypto in Congress podcast - I’m your host Tyler Whirty. This week’s guest is a special one – Kristin Smith, executive director of the Blockchain Association – who, like Jake Chervinsky last week, is also a founding board member of HODLpac.
Kristin has a very special perspective on the dialogue between crypto and Congress. She has spent most of her career in DC politics, as a staffer in the Senate and the House and as a lobbyist on various issues. Now, at the Blockchain Association, she and her team are very active on Capitol Hill, where they meet with members and their staff about all things crypto.
In addition to that role however, the Blockchain Association also helps organize the industry’s other policy-related efforts of all kinds.
So without further ado, Kristin, welcome to the show!
Kristin Smith:
Thanks for having me Tyler.
HODLpac:
Absolutely, so to start off with our customary intro question for non-Congressional guests: how did you end up getting involved in crypto? And specifically, for you, with the Blockchain Association?
Kristin Smith:
Yeah! So, I came to crypto a couple years ago, I guess it was really three years ago, when I started learning about the space. I am a longtime Washington, DC person. I worked on Capitol Hill for 10 years and then worked as a lobbyist at a couple multi-client lobbying firms. And so I've always been in kind of the advocacy and influence business, whether it be on the receiving end or the actually advocating end. And I was at a firm and I had one client – actually Overstock – who was interested through one of their subsidiaries – Medici Ventures – in blockchain and crypto. And I really got into it. I mean, I think like all of us in the industry, I kind of [went] down the rabbit hole and realized, at the time, that there was some activity going on, but that we needed to build out more infrastructure in Washington in order to educate and influence policymaking decisions. Coin Center had been around and they do a great, great job, but you need more than one group because other industries have a very large presence.
And so [the Blockchain Association] was sort of set up with a few folks at different companies that were looking to bring a trade association together and they needed someone who was willing to quit their job to do this full time. And I was more than happy to take up the challenge!
HODLpac:
Great. So, you mentioned that the Blockchain Association is a trade association. What are those? What exactly do they do?
Kristin Smith:
Yeah, so the Blockchain Association is a trade association, so it is a nonprofit that is funded by member organizations. And our mission is to improve public policy for the crypto industry.
Our members are a mix of folks in the crypto industry ranging from exchanges to early stage investors to organizations building out their own chains to others that are building applications on top of those chains. And so it's a good mix. Everyone believes in the power of decentralization and are working exclusively on those issues. It's a really great group of members and because we're fairly focused in what we represent, we're able to get pretty detailed in the recommendations that we do.
HODLpac:
And what what form do those recommendations take? How do trade associations play a role in the policymaking process?
Kristin Smith:
Yeah, so I mean at the highest level, there are trade associations that have different areas of focus, but our area of focus is policy change, like I mentioned. And so it's sort of a multistep process.
One of our jobs is to keep our industry members educated about the developments that are happening in Washington, DC. We have a lot of information here and we have a very vast sort of network of people that we deal with so we know when things are going to happen and we share that information with our members.
But perhaps one of the most important roles, I think, of our trade association, is to facilitate dialogues between different industry member companies so that we can come up with unified policy positions. And I'll get into, in a minute, what I mean about by policy decisions or positions.
But, for example, I know Jake Chervinsky was on your show last week. He co-chairs our DeFi working group where we convene people within our member organizations who are interested in DeFi. We talk about the policy issues related to that.
So the policy positions can come in many forms in the early stages of a policy issue. A lot of it is just sort of education about what the issue is or what the underlying aspect of the industry behind that issue is. But then as we go forward, oftentimes we'll propose things in the early stages just as sort of a blog post or a white paper.
But other kinds of more formal positions are, for example, we'll write a letter to the Financial Stability Board about how we think global stablecoin arrangements should be made, or we'll write a letter to the Office of the Comptroller of the Currency responding to a request for comments on the intersection of crypto and banking.
Or, we'll even get more specific, sort of like we did with the Token Taxonomy Act several years ago, when we put pen to paper and propose legislative language that we then share with members of Congress for their consideration.
Sometimes it's on the defensive side where we see a bill that's been introduced that we don't like, and we try to offer changes to that.
So these are all discussions. You know, those positions don't just create themselves. They're the product of a lot of input from a lot of different experts within the industry.
And then sort of the third thing we do after we have a position on any given particular issue is we go advocate for that issue. We have a great network with the relevant regulators and lawmakers here in Washington, DC, and we go and work with them in order to try to get the bills that we want introduced and to get them from the introduction phase to the committee phase or to the floor.
In summary, it's really working directly with government on many levels and explaining to them, why we think they should take up our cause.
HODLpac:
Awesome, that is some good insight for our listeners who might not know much about how DC works. But there is another part of the advocacy scene, I suppose, which is fundraising and political action committees ,as well as grassroots advocacy. And, of course, along with being the head of the Blockchain Association, you are separately a cofounder and board member of HODLpac, so can you talk a bit about PACs, what they do and why they are important?
Kristin Smith:
So, political action committees are entities that are registered with the FEC, that raise money from individuals in order to then donate those funds to different political campaigns. At least, that's sort of how I think of PACs. They are hugely important to the process here in DC.
And I know that there are a lot of people out there that think that money in politics is bad. The reality is: it is a tool that everyone uses in order to get in front of the policymakers that we need relationships with.
But maybe I'll back up for a second and talk about my experience when I was a staffer on Capitol Hill and how over time I came to learn the importance of working on legislation that would help my boss raise money. So, you know, I worked for two senators and one Congressman and the Congressmen in particular, you know, they're up for election every two years, the Senate it's every six years so there's a little bit less pressure there.
But, you know, for those guys to show up at their job every day, they have to be elected and to get elected, you generally have to raise several million dollars every couple of years. In order to run your campaign, you need to buy TV ads, you need to pay for campaign staff, you need to print yard signs. There's all these costs associated with that. The biggest cost tends to be the airtime for TV ads. And if you are a Senator and you're running statewide, it gets even more expensive to do that. Their campaigns can be, every six years, in the tens of millions of dollars – in that range.
And so if one likes going to the Capitol building every day and, you know, a member of Congress likes going to the floor to vote and they want to stay and continue doing that, then they also, as a side job, essentially, need to be raising money.
There's a lot of rules around how all of this works and the Federal Election Commission requires disclosures, and so there is a tremendous amount of transparency, and there are limits in terms of the dollar amounts given. But, you know, when, for example, when I was working for a member of the House that was running for the Senate over a two year period, he had to raise $10 million and you had to travel to 38 different States to attend things like in-person fundraisers in order to do it. I mean, it took a tremendous amount of his time.
And the funny thing is the elected officials that are running for reelection, or, you know, those candidates who are not elected but are trying to get elected: they don’t actually like this process either, but they don't have a choice because they need the funds in order to have their job.
So, you know, for me as a congressional staffer, you were always very aware – and it was never in any sort of official way – but you're always very aware of who the big donors are and who the industry organizations or the advocacy organizations are that have supported “the boss,” meaning the Congressman or the Congresswoman, in that campaign. There's a definite awareness.
So as a staffer, I was always trying to figure out: what is an agenda that I can have my boss push forward that will help him do what he needs to do for his constituents, but also help him get elected? Right?
And so there's sort of two things you look at to get elected.
One, you need votes, and so when you're hearing from constituents – whether that be back in the district at a town hall meeting or constituents calling into the office, or sending emails in, or tweeting out a Congressman – you kind of get a sense that, “okay, these are my constituents and they care about these issues that I will take policy positions that support what they care about.” And so the grassroots element is a very important thing.
But, two, you're also trying to figure out, “well, what can I do as a staffer to ensure that the boss is getting campaign contributions?” And, if I'm personally as a staffer and passionate about crypto policy, I want to make sure that the boss is going to be taken care of. And sometimes because a Congressman or woman only has so many hours in the day, they can't take on these projects unless there is a benefit to their constituents or to getting reelected.
So, I think it's important for the crypto community to play in this space to participate both on a grassroots side and a political giving side, because it will give us the tools we need to actually grow and cultivate more champions for our policies.
HODLpac:
Great, and I obviously agree with you there! And I’m excited to experiment with using the emerging technology and innovations from the crypto industry to build HODLpac as a community governed organization. One of the things I wanted to ask you about, related to this, is what you think of that opportunity – to introduce a new style of advocacy to DC – in the form HODLpac is promoting?
Kristin Smith:
I think there are a lot of exciting opportunities that HODLpac brings and really it's the first time I've seen of this sort of community governed approach to PACs.
You know, typically the way a PAC works today – and you can see there's new PAC registrations that come every day – some of them are going to be reputable, others are just sort of an effort of somebody to try to get funds into a particular political cause that might not have the best of intentions.
But what I like about the HODLpac is that the decisions about which candidates get funded are made by the community themselves. So it is not going to be a situation where, you know, there's a committee or there's one person that's picking 10 candidates, and they're going to take all of the funds that they get and give them to those 10 candidates.
Instead, this is a situation where the community can decide, “Hey, I like what a certain congressmen doing and I'm going to put them on the ballot and we're going to direct funds to them.”
So I think that's really powerful because it takes away the need for sort of this centralized decision making, just like we see with all crypto networks.
And I think that that will make it more efficient. I think it will make the money be allocated in a way that reflects the contributors to the fund. But I also think, on the grassroots side, it will allow us to mobilize supporters of good crypto policy and the people of the crypto community in a way that is organic and genuine.
A lot of times today with different grassroots programs you know, we call them AstroTurf here in DC. You'll hire a group and they'll gin up a bunch of form emails or something of that nature. I think in the crypto world, that everyone is so connected and shares so much information that we can activate input into Congress without having to have an expensive, sort of formal, top down structure. I think it can be really a true grassroots effort that that is backed by real people who are really passionate about getting good crypto policy.
HODLpac:
Very cool, so to switch gears a bit - from how advocacy works to what you are advocating for - I wanted to ask you about the latest on crypto policy DC. You have a very unique position to view all of this since you regularly talk to both policymakers and the industry. So since the Blockchain Association started, what are some of the big ticket items that you’ve been paying attention to and how have they changed over time?
Kristin Smith:
Yeah, there's definitely been a little bit of a shift and sort of expansion of the number of issues relating to crypto policy in DC. When we started the Blockchain Association two years ago, issues around getting clarity on securities laws and when they apply was probably the top on most people's minds, because we'd been coming off the ICO craze and there'd been a bunch of enforcement actions and projects wanted some certainty to know. That has become a little bit less hot of an issue than it was a couple of years ago, because the SEC did provide some additional guidance there. I think different projects and companies have come up with different ways to evaluate a token offerings and to determine, you know, when they're security and when they're not. And so the industry sort of put some best practices in place, and I don't think it's quite as much of an issue. Though there are some things happening in the courts that we're watching very closely, but it's very hard to influence the court decision. It's much easier to influence at the legislative branch or with regulators.
But when Libra came around last year, that sparked a discussion on stablecoins, the digital dollar, you know, and what can we do to upgrade our money? And that's a conversation that’s continuing to be had here in DC, especially in light of the COVID-19 and concerns about distributing stimulus checks or fears about using actual paper cash. And so there's a lot of discussion going on, but there isn't a whole lot of clarity about what direction policy makers need to go, or if they even need to do anything at all. There have been some calls for establishing accounts at the Fed to hold digital dollars, or there have been calls for the Fed to issue a tokenized dollar and that they should do some pilot projects around that.
But there's also a ton of activity with stablecoins going on in the private sector right now which can happen and thrive without having a whole lot of government intervention.
But it's definitely a topic that's top of mind with policy makers and lawmakers, and it's provided a great opportunity to come in and sit down and have a conversation with them and talk about what crypto is and how it can help improve money and payments. We've also see,, most recently at the OCC, which is the Office of the Comptroller of the Currency, we have acting controller, Brian Brooks over there. He came from Coinbase and he has a lot of knowledge and understanding and issued a letter a few weeks back that clarified that banks do have the ability to custody crypto.
And so little things like that, that are interpretive letters, can actually go a long way towards sending good signals to institutional players and also individuals. And I think we're going to continue to hopefully see some more of those out of the OCC in the months ahead.
But we've also seen a lot of work going on at the IRS with tax policy. You know, the IRS is looking to come up with some reporting requirements for exchanges. It'll make it easier for individuals to know how much their tax liability is at the end of the year. Or there is an issue around how to tax staking rewards. And, at the Blockchain Association, we worked with our friends at the Proof of Stake Alliance as well as Coin Center in order to get a letter coming from some congressmen this week.
I should say, you know, Congress obviously passes legislation, but they also have an oversight role when it comes to federal agencies. And so you don't always need to have Congress introduce and consider and pass a bill in order to impact policy. Small groups or individual members of Congress often write letters to agencies, where there's already the authority in place and they can make a decision.
That is what we're seeing with the proof-of-stake issue: Congress is sort of pushing the IRS to make a decision and make a move. And that's an important role for Congress. And it's all the more reason why it's important to have good strong relationships and an educated group of champions on Capitol Hill, because it's not just legislation, but it's also putting pressure on these agencies to take the right actions.
So there's a lot of stuff going on and there's a lot of changes ahead, most likely. I think the conventional wisdom is that the election will lead to some changes in not only the House and Senate, but possibly at the White House. And even if the wind sort of change and there isn't a shift at the White House, there will probably be changes within the federal agencies. And so it's important that we stay focused and continue to build relationships and when somebody new comes in, we get in there quickly and work with them to get them up to speed because there are many different parts of government right now that are looking at crypto and trying to understand crypto. And I think we're in a good position to hopefully have some additional good policies come out of government in the months and years ahead.
HODLpac:
You mentioned the OCC’s recent actions and the letter to the IRS about proof-of-stake taxes - these things are a bit different than the schoolhouse rock “I’m a bill on capitol hill” version of policymaking. It’s not necessarily “behind the scenes” because all these things are done in public but I would say its definitely more in the weeds and less in line with a layperson’s understanding of government. Yet, at the same time, all of this things do come back to elections since democratically elected representatives appoint and approve of regulators and oversee different agencies. So can you talk a bit about how these kinds of things come together and why? And by “things” I mean actions by a regulator absent of Congress’ involvement or Congress overseeing things without direction legislation.
Kristin Smith:
Yeah. So it's a mix of things. You know, typically something doesn't happen unless someone asks for it to happen. Though that's not always the case, sometimes there are just so many people that are maybe using a specific product or service that regulators have an obligation to look at it.
But, you know, it tends to be that, especially with something like crypto, the solutions are so specific that unless somebody offers offers up some ideas you’re not going to get the discussion going.
Well, let's take the OCC as an example there. I mean, that is a situation where you have a regulator who has long been passionate about FinTech issues and understands that if we improve our banking system, and we allow more technology into the banking system, we can solve some of its underlying problems and flaws. And so the OCC situation is a situation where you have a comptroller that has an agenda, and he's moving down. That that's a little bit of an outlier. Typically things only happen when there are forces pushing for an action.
And so in the case of the proof of stake taxing, that wasn't like the IRS was sitting around and being like, “what are we going to do with these like staking rewards?” That was a group of companies, some of them were Blockchain Association members (but we also work with the Proof of Stake Alliance), that was them figuring out “what is a way that these can be done? How can we look at this?” And they authored a white paper and they went around and talked to the IRS, and then they went around and talked to the Hill and they convinced enough lawmakers that they supported this idea.
So that was the case where that was driven by groups that wanted to see change. And there wasn't anybody opposing that, and they've been able to make progress. I mean, it's still not done yet, but I think it's on a good path. And but you know, you don't need legislation when there's existing authority in that an agency has.
And so in both the case of the OCC and the IRS, Congress doesn't have to pass a bill because they [OCC and IRS] have the authority to make these decisions independent of any new legislation. And so that's when these kinds of maybe lesser known tactics of getting congressional support or putting pressure on an agency to take an action is it's actually common, very common. There are lobbyists and trade organizations and individual companies and other types of advocates here in DC that use these levers every day. It's only when you have to do something that's fundamentally new, or that gives you know a different direction or a different authority to an agency ,it's only then that you actually need legislation to get done, which is a very long process. And so sometimes it's easier if you can find a way without needing a new bill, then that's a faster way to get an outcome you need.
HODLpac:
So something we’ve discussed with most of the other guests on this show is the “digital dollar.” Can you talk about a bit about how you see this ongoing conversation from your perspective and maybe how the crypto world can influence or help that process along?
Kristin Smith:
Yeah, I think the consensus of the Blockchain Association members differs a little bit with the Digital Dollar Project or some of these other efforts are out there, it's our opinion that: the dollar is the dollar, but we can take a crypto wrapper and put it around the dollar and we can move it around a lot faster. We can dice it up smaller, we can lower fees, we can have access to it 24 hours a day. We can improve the dollar by bringing it into the crypto world. And you know, there are different models for doing that, right. I mean, there are some like USDC that actually are backed by dollars sitting in their bank account, but there's, there are other really cool projects out there like DAI or Celo dollars. And some of these others that are protocol based but are meant to track a dollar.
And I think what your sort of average policy maker who hasn't through this perceives is, “Oh, China is creating a crypto or, you know, a blockchain backed currency. And therefore we have to do that with the dollar here in the US”
I actually think the answer is here in the US we don't do industrial policy, or at least that hasn't been, what's made this country great. What's made this country great is private individuals have gone out and created technological solutions in order to meet the demands of consumers and businesses. And that's what we see happening that we have a lot of stable coin projects that are out there, that are all a little bit different, that all have different features, but they don't need to be created because the Fed issued a dollar. These are all projects that can create value in different ways. And so I think that I'm more interested in letting these innovators and these entrepreneurs pursue these ideas. And if we need to put some parameters around that, to make sure that that they're properly regulated, we can do that, but I don't know if that needs to come from the government itself.
HODLpac:
So another question I wanted to ask you on here is, as we build HODLpac and grow into a position where we can be supporting candidates for Congress - how should the community think about who to support?
Kristin Smith:
I think they're really sort of two types of members of Congress or congressional candidates. It's those that have shown interest in the crypto community. That's sort of the first type. These are people that might not know every single facet or detail, but they're interested in it and they want to learn, and they're willing to step up and put their name on legislation, or put their name on letters and, and help try to create a better policy environment for the crypto community. Like, I think we want to take care of our champions and take care of our friends.
The other sort of type of lawmaker or candidate that I think HODLpac should consider. And again, it's community governance, so it's not up to me, but are those that might not be fans of this space yet, but if they saw that this was an active and vibrant community, they would maybe start to learn about crypto and ultimately become our champions later. It's the types of people that chair key committees or subcommittees in the House and Senate or that maybe represent districts that have sort of a high concentration of crypto projects or people who are into crypto.
And so I think it's a combination of you know, supporting our champions, but also laying the groundwork to create new ones.
HODLpac:
Great, and finally, as i said earlier, I think you have a very interesting perspective to view the conversation between the crypto community and regulators and policymakers. Do you have any parting words for either or both communities?
Kristin Smith:
I think, you know, for those in the crypto community, it's a really especially unique time. I think that government and congressmen and their staff are learning to be remote for the first time. And I think it's going to be that way for a while longer. And I think this provides an opportunity for the crypto community, because you don't have to go dust off your suit and hop on a plane and come to Washington to sit down and have a meeting with your Congressman or your staffer. You can actually do this by calling up the office and setting up a phone call and getting on a video call. And that wasn't part of the culture before, but it's now being part of the culture of advocacy now. And so I think this is a huge opportunity you know, for, for individuals who were just super passionate about this to get involved and to reach out and, and you can do that by, you know, going on to house.gov or senate.gov and calling the number, and then they'll send you to your Congressman.
And, you know, I think it's important for them to hear from their constituents and their voters that this is something that people care about. I think we're at what 40 million people in the US that own some crypto. I mean, that's, that's great. And I think that number is going to continue to grow. And that when congressmen see that their constituents are using crypto and like crypto, that they will take the time in order to get the policies right.
HODLpac:
Awesome. Kristin, thanks so much for your time today. This was great.
Kristin Smith:
Yeah. Thanks, Tyler. And look forward to your next episode. That's really been enjoying this series.
HODLpac:
Thank you for listening to Crypto in Congress presented by HODLpac. If you’d like to learn more about HODLpac and our mission check us out www.hodlpac.org or follow us on twitter @HODLpac. Also, be sure to subscribe to our newsletter to get exclusive updates and access to transcripts from each episode. See you next week