Regulatory void is freezing Wall Street out of digital assets

Former Commodity Futures Trading Commission Chair Christopher Giancarlo, who led the agency from 2017 to 2019, argued in a podcast interview that traditional banks, more than crypto firms, need regulatory clarity to invest in new digital payment rails, as the Clarity Act remains stalled in Congress. He put the bill’s odds of passage at 60-40.

Giancarlo described banks as constrained by oversight from boards and regulators, while crypto companies keep launching products despite enforcement actions. “The banks need this more than crypto,” he noted, adding that general counsels are telling boards they cannot commit “billions of dollars to build these digital rails unless you’ve got regulatory certainty.”

The Clarity Act would set federal rules for digital assets and define the boundaries between the Securities and Exchange Commission and the CFTC. With the legislation stuck, he argued, lenders are reluctant to fund blockchain-based infrastructure for payments and settlement. “The banks can’t afford regulatory uncertainty,” he added.

By contrast, he portrayed crypto developers as likely to keep building regardless of Washington’s timeline. “Crypto is going to build,” he said. “These are risk takers. They’re going to build it here, or they’re going to build it abroad.” If U.S. policy stays unclear, he warned, activity could shift to Europe or Asia.

Giancarlo pointed to stablecoins-tokens pegged to assets such as the U.S. dollar-as a pressure point in the debate. Banks worry that allowing crypto firms to offer rewards on stablecoin balances could draw deposits from traditional accounts, while crypto companies argue that incentives help new networks gain users.

He also said the dispute has split along partisan lines. “Unfortunately, it’s fallen into politics, right and left, Republican, Democrat,” he remarked.

Even if Congress delays further action, Giancarlo noted that regulators could issue rules that provide interim guidance. In his view, lawmakers from both parties see a need to modernize payment systems and clarify market oversight.

“If nothing else, we need to clarify the rules, the guardrails between the CFTC and the SEC,” he said.

He compared current bank infrastructure to analog networks that will be replaced over time by software-driven systems. “The banks recognize the analog network system they operate on is going to be superseded by this,” he said, referring to digital rails built on blockchain and related technologies.

Giancarlo maintained that crypto builders have continued through past enforcement cycles, citing a tougher stance at the SEC during his CFTC tenure. “Crypto doesn’t need it,” he said of new legislation. “Look, they were building even under the whip hand of then-SEC Chair Gary Gensler.”