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Crypto in Power 2021

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By David Grider, Head of Research 

 

At its core, blockchain technology offers scalable networks that transcend geographic borders and traditional power structures. As the power and utility of these networks have grown, so has their importance. Individuals have been using blockchain to coordinate solutions to social and economic challenges for some time, but 2021 will be remembered as the year when it became strategically important on the world stage. Here are four times crypto crept into the halls of power and enabled underdogs to compete with centralized incumbents.

 

Municipal Adoption: Major cities have always competed to attract new economic interests. Traditionally, these have been large companies with multinational footprints, like Amazon. But in 2021, municipal governments began competing to attract crypto companies in an effort to turn their cities into new hubs for the crypto economy. Recent mayoral elections in Miami and New York City supercharged this competition. Both Mayor Francis Suarez (Miami) and Mayor Eric Adams (New York) made crypto adoption top priorities for their administrations, and both politicians pledged to take paychecks in Bitcoin. Moreover, both mayors have embraced the idea of municipal cryptocurrencies. MiamiCoin, which was launched in August 2021, has generated more than $20 million for the city, according to reports.

 

Crypto Lobbying & Government Acceptance: The U.S. crypto industry ramped up lobbying efforts and quickly organized a campaign to amend certain provisions within the Infrastructure Investment and Jobs Act which would require additional IRS disclosures from crypto firms and exchanges. In April, a consortium of firms launched the Crypto Council for Innovation to act as the industry’s lobbying platform in Washington, D.C. Building on the efforts of organizations like the Blockchain Association, ADAM, and Coin Center, the group will fund research projects and lobby political leaders. Moreover, between July and September, crypto firms doubled lobbying expenditures.

 

Key figures in Washington have taken notice. Senators Patrick Toomey (R-Pa), Ron Wyden (D-Ore.), and Cynthia Lummis (R-Wyo.) proposed an amendment that would exempt crypto miners and software developers from the reporting provisions. While the amendment did not receive enough support, it is clear leaders in Washington are beginning to embrace the crypto industry.

 

In December, representatives from the crypto industry appeared on Capitol Hill to testify before the U.S. House Financial Services Committee. Notably, past skeptics, like HFSC Chairwoman Maxine Waters (D-CA), acknowledged the growing acceptance of crypto technology.

 

Constitution DAO: In November, thousands of individuals from around the world came together as a decentralized autonomous organization (DAO) with the aim of bidding on an original copy of the United States Constitution at auction. In exchange for contributions, participants received digital tokens which carried the right to vote on decisions about the document. Supporters rallied around the idea of using a democratic decision-making body to take ownership of one of the world’s most storied symbols of democracy. The DAO crowdfunded approximately $47 million in Ethereum towards the effort. While they were ultimately out-bid, the movement inspired a wave of similar projects, and showed that people with shared beliefs could organize to compete in establishment forums previously available only to the wealthiest individuals.

 

El Salvador Bitcoin Bond: In November, President Nayib Bukele of El Salvador announced plans to build a “Bitcoin City” using funding from a Bitcoin-backed bond offering. This offers an alternative to more traditional funding sources, such as the International Monetary Fund, which may come with strict conditions attached. The announcement came after El Salvador became the first nation to adopt Bitcoin as legal tender. The $1 billion 10-year bond issuance is planned for 2022 and would carry a coupon of 6.5%.

 

The last few years have shown how power is very rarely distributed evenly. But crypto ecosystems offer a way towards organizing against entrenched, centralized authorities. While global mainstream adoption is still in the future, these events offer testimony to the staying power of crypto networks and their ability to scale globally. Grayscale looks forward to continuing to support the crypto investment community as progress continues in 2022.

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