Coinbase's Paul Grewal: Cryptocurrency Must Stay Out of Politics

Paul Grewal, the general counsel at Coinbase, has expressed his opinion on the importance of keeping cryptocurrency out of politics. He believes that bipartisan cooperation that brings together both sides of the political spectrum is necessary for cryptocurrency policy to succeed in the U.S.

Grewal, inspired by the rapid adoption of cryptocurrency regulations in Asia, remains bullish on the U.S. At the Bitcoin Nashville conference, Republican candidate Donald Trump's promise to fire SEC Chairman Gary Gensler drew loud applause.

While Republicans have embraced cryptocurrency as one of their key issues, Grewal stresses that the issue should not become partisan.

“My main concern is that cryptocurrency does not become a politicized and partisan issue that could slow its development and even threaten its future,” Grewal said at the Asia Blockchain Summit in Taipei, emphasizing the need for bipartisan support to update the policy.

Part of the need for change in the U.S. is the use of outdated regulatory frameworks like the Howey test to address modern financial realities.

“You have to understand that the Howey test was developed in the context of Florida orange grove real estate in the 1940s and ’50s,” he said, arguing that applying the Howey test to blockchains and cryptocurrencies “blindly and mechanically” makes no practical sense.

“Precedents, even from the Supreme Court, have always been recognized as applicable in specific contexts and need to be adapted to new technologies and issues emerging in markets and the economy as a whole,” he added. “It’s important to respect precedent and use decades of wisdom to apply it in a variety of contexts without being tied to it in a way that doesn’t make practical sense.”

Asia doesn’t face the same constraints as the Howey test, and Grewal appreciates how regulators there are creating rules from scratch by listening to industry input.

Hong Kong’s path to creating its own digital asset licensing system and allowing crypto ETFs, which the SEC has banned, began with an announcement in the fall of 2022 that it would reconsider its position on the issue.

“What I find most inspiring about Asia is that there’s a focus on specific issues and very little focus on ideology,” he said. “There’s an interest in understanding the technology, where the industry is going, and our experiences… because they want to learn and take the best and avoid the worst.”

By contrast, in the U.S., it’s difficult to have “a meaningful dialogue with large parts of the government on crypto and policy,” Grewal acknowledged. However, he remains optimistic about America as both major political parties begin to recognize the value of cryptocurrencies.

"Cryptocurrency is ultimately code. There are many other issues in the U.S. and around the world that we can disagree on. We need to be able to agree on what the code does and how it works," he concluded.