Empire Cross-Post: DC Crypto Week Takeaways With Rebecca Rettig & Alexander Grieve

This episode unpacks the landmark US crypto legislation that just passed, revealing how new rules for stablecoins and market structure will reshape the investment landscape for founders and funds.

A Monumental Week for Crypto in DC

The podcast opens by framing the significance of "Crypto Week" in Washington D.C., where three pivotal bills passed the House. Alex Grieve, VP of Government Affairs at Paradigm, provides a 15-year DC insider's perspective, highlighting the industry's journey from obscurity to the legislative main stage. He recalls demoing the Uniswap protocol to a staffer in 2022, illustrating the long-term educational effort that culminated in this moment.

Rebecca Rettig, Chief Legal Officer at Jito, underscores the dramatic shift in political sentiment. She notes that the industry has moved from being "pariahs in DC" to being recognized as a vital part of the American economy.

"The fact that the administration and Congress is... understanding that it's just going to be an important part of the American economy going forward I think is a huge deal." - Rebecca Rettig

The three key pieces of legislation discussed are:

• The Genius Act: Regulates dollar-pegged stablecoins.
• The Clarity Act: Establishes a market structure and divides jurisdiction between the SEC and CFTC.
• The Anti-CBDC Surveillance Act: Prohibits the US from issuing a central bank digital currency.

The Genius Act: A New Era for Digital Dollars

The Genius Act, which creates a federal regulatory framework for stablecoins, passed with an overwhelming bipartisan majority (308-122). Alex Grieve explains that the concept of digital dollars was relatively easy for Congress to grasp, leading to broad support from both crypto-native firms and traditional banks. The vote is seen as a firm endorsement of upgrading US payment rails and reinforcing the dollar's global preeminence.

• Technical Framework: The bill requires stablecoin issuers to maintain fully backed reserves of US dollars or other highly liquid government-issued assets. It establishes a new federal chartering regime under the OCC (Office of the Comptroller of the Currency), the U.S. Treasury bureau that charters, regulates, and supervises all national banks.
• State vs. Federal Path: Issuers with under $10 billion in assets can seek a state-level charter, preserving states as "laboratories of innovation." Those exceeding the threshold must obtain a federal charter.
• Actionable Insight: Rebecca Rettig reveals that companies are already lining up for this new OCC charter, signaling an immediate race to market for regulated stablecoin solutions. Investors and researchers should watch for an explosion in "white label" stablecoin services designed to help traditional businesses like Walmart and Shopify integrate digital dollars into their payment flows.

Debating the Details of the Genius Act

The discussion addresses key criticisms and nuances of the bill. A concern that the act could be a "backdoor to a CBDC" is dismissed by Alex, who clarifies the bill actually prevents the Federal Reserve from expanding its authority. A CBDC (Central Bank Digital Currency) is a digital currency issued directly by a government's central bank, and the speakers agree it would require separate, explicit congressional approval.

• Innovation and Competition: The bill prevents large, non-financial public companies (like Meta) from issuing their own stablecoins directly. This is seen as a move to push them toward using chartered, white-label solutions, which could concentrate power with early issuers but also creates a new market for B2B service providers.
• Interest-Bearing Stablecoins: A provision preventing stablecoins from natively offering interest was a concession to banks, who feared competition from high-yield crypto products. However, Alex notes that pass-through rewards, such as those offered by exchanges like Coinbase for holding USDC, remain possible through third-party arrangements.

The Clarity Act: Untangling SEC and CFTC Jurisdiction

The Clarity Act is presented as the more complex market structure bill. While it passed the House, it now faces a longer, more uncertain path in the Senate, where significant changes are expected. Its core function is to define the regulatory lanes for the SEC (Securities and Exchange Commission) and the CFTC (Commodity Futures Trading Commission), aiming to end the era of "regulation by enforcement."

• Key Technical Shift: Alex Grieve explains the bill's novel approach. The initial fundraising contract for a token is treated as an SEC-regulated securities transaction. However, the token itself is considered a commodity for all secondary market trading, falling under the CFTC's purview. This simplifies the previous model where a token had to "transform" from a security to a commodity over time.
• Strategic Implication for Founders: The bill creates a legitimized pathway for token pre-sales (up to $75 million), which could revive ICO-style fundraising. However, this comes with a major trade-off: significant lockup periods for insiders and teams until the project reaches a state of "maturity."

Defining "Maturity" and Protecting DeFi

The bill introduces a "maturity" test, which replaces the older, more ambiguous "decentralization" test. A project is deemed mature after a four-year period and once ownership concentration falls below certain thresholds (e.g., no single entity holding over 20% of the supply).

A critical provision for researchers and developers is the integration of the Blockchain Regulatory Certainty Act. This clarifies that developers who publish non-custodial code and do not take control of user assets are not liable as money transmitters. This is a landmark protection for open-source innovation in DeFi.

"Decentralized finance or DeFi developers do not take custody of user assets, nor do they control user assets. Therefore, we should not treat them in the same way that we treat centralized actors who do have custody and who do have control over the assets." - Rep. French Hill (as quoted by Rebecca Rettig

• Investor Insight: Alex warns that a major battleground in the Senate will be the protection of DeFi. Traditional finance incumbents, like the CME Group, are actively lobbying to limit competition from decentralized derivatives protocols, making this a key area for investors to monitor.

The Anti-CBDC Act and Final Takeaways

The Anti-CBDC Surveillance Act, which passed by a narrow margin, explicitly prohibits the US central bank from issuing a retail CBDC. Alex Grieve frames this as a crucial preventative measure to protect financial privacy and sovereignty, aligning with core crypto principles against centralized surveillance.

• Genius Act: Founders and investors should immediately explore business opportunities in the regulated stablecoin ecosystem, from white-label issuance to clearing and settlement solutions.
• Clarity Act: Stakeholders should monitor the bill's progress in the Senate and engage with representatives. The definitions related to DeFi and protections for software developers remain critical points of contention that will shape the future of decentralized innovation.

The Next Frontier: Crypto Tax and Staking

Looking ahead, the conversation identifies crypto tax as the next major legislative battleground. Rebecca Rettig, drawing on her experience at Jito, emphasizes the urgent need for clarity on the tax treatment of staking rewards for both direct and liquid staking.

• Forward-Looking Insight: This tax clarity is a critical prerequisite for including staking in future ETFs. The current ambiguity creates a major hurdle for the Grantor Trust structure used by these financial products. This issue will be a primary focus for protocols and investors seeking to bridge DeFi yields with traditional financial instruments.

Conclusion

The passage of the Genius and Clarity acts marks a pivotal shift from regulatory ambiguity to structured frameworks. For investors and researchers, the immediate focus is on capitalizing on regulated stablecoins while strategically preparing for the evolving market structure and upcoming tax battles that will define DeFi's future.