Benjamin Dean, director of digital assets at WisdomTree, has said three “major policy developments” within three months this year marked a paradigm shift in the adoption of crypto assets.
Speaking to ETF Stream, Dean (pictured) highlighted the recent US Executive Order on Ensuring the Responsible Development of Digital Assets as an attempt to measure the costs and benefits of digital assets in a “well-worded, structured and pragmatic policy approach”.
“When I lived in Washington I used to do tech policy work and go to the Hill and brief congresspeople on cyber security,” he continued. “I would also mention to them that bitcoin is a thing and it is going to be quite consequential. The response I would get is ‘what is bitcoin? What is crypto?’.”
“We have gone within five years from a position of little-to-no awareness to one where the executive – the White House – has issued this executive order telling a series of executive agencies to prepare a series of reports about policy responses to digital assets.”
Looking at the Treasury’s announcement that it wants to make the UK the global ‘crypto hub’, Dean said the new policy stance is “scant on details” but described the move as “very positive” and in “stark contrast” to previous, less accommodating messaging.
“They do mention the regulatory sandbox, the crypto sprint with industry stakeholders and ideas around reforming taxation, particularly around flash lending,” he continued. “That policy position is good and they will go and develop more initiatives over time – but coming from the Treasury is very different than coming from the executive.”
Finally, he pointed to the EU’s Markets in Crypto-assets (MiCA) regulation which is being “continually redrafted” in the European Parliament.
The parliament’s multi-stakeholder approach means engaging with lawyers, academics and relevant persons from financial services and the tech sector.
Following this, it goes to a tripartite dialogue with the European Commission and the Council of Europe before entering a directive that the member states are meant to enact with their own delegated bodies.
“If we look at all three, accepting they are all different and at different stages of development, the common thread is that they have all conceded that this is not going away,” Dean said.
“They have acknowledged that there are benefits and risks and they are all going to in their own way assimilate this new technology into the existing regulatory and legislative frameworks.
“This is exactly the same way the internet was integrated into regulatory and legislative frameworks.”
Dean, who spoke at ETF Stream's Crypto 2025 event in March, argued the success of new regulation will hinge on facilitating the beneficial uses of crypto while not acting based on fears of risks that existed in the past.
On the Financial Conduct Authority’s ban on retail access to crypto exchange-traded products (ETPs), he said: “The FCA’s position was to protect retail investors from unscrupulous actors in the derivatives market. Their ban was around the distribution, marketing and sale of those derivative products to retail investors, and it addressed a risk the FCA perceived to exist in the past to retail investors.
“Going forward, it would be prudent to re-evaluate whether that risk still exists and then put in place measures that minimise the ability of these bad actors to operate.”
Looking at the Securities and Exchange Commission’s decision to deny WisdomTree’s – and many others’ – applications for a bitcoin spot ETF in the US, Dean argued the futures ETFs currently available to investors are “sub-optimal” due to their inherent performance drag.
“Our view is that in time the SEC will adjust its position as concerns are alleviated. It may not be under this administration, it may be the next one, regulators take time,” he added.
Finally, on the increasingly popular topic of crypto staking and yield generation within ETPs, Dean said the amount of yield given to different stakeholders that “the market would find where the balance lies” as issuers prove their efficiencies and new competitors arrive.
Unlike securities lending, staking does not involve physically lending out assets, instead they remain in an issuer’s custody. While operational and cybersecurity risks exist, this means counterparty risk is less of a concern.
“Once you get the middle of the adoption curve where you bring on 30-40% of the population, they are not as technically savvy as early adopters so they are going to need something that helps them address and manage risks,” Dean concluded. “Being brought under the regulatory umbrella shows the technology works.”
To watch the on-demand sessions of Crypto 2025, click here.