By Cleve Mesidor

On the heels of an election cycle where the crypto industry had a significant impact on results, many wonder about the implications for policy with a more receptive Administration and Congress on the horizon.

Look no further than market structure legislation for the emerging blockchain technology and digital assets space. I assert that size must be central to that debate to ensure micro-enterprises can comply and compete in the growing $2 trillion market.

As both chambers of Congress deliberate the rules for the sector - from oversight, to disclosures, to compliance measures - ensuring startups, SMEs can also become market leaders should be core to legislative packages.

In the U.S. House of Representatives, the Financial Innovation and Technology for the 21st Century Act is advancing with bipartisan support. U.S. Senator Debbie Stabenow, Chair of the Agriculture Committee, is working on a similar bill with Senate colleagues. While the goal is to address concerns regarding regulatory uncertainty, absent in both proposals are measures to foster market competitiveness so that various categories of companies – large, small, and micro alike - can do business on a level playing field and in a compliant manner.

We need regulatory clarity for Web3 and DeFi. Establishing which digital assets are securities or commodities and which regulators have oversight is past due. Developing disclosure standards to empower market participants is crucial. Setting compliance benchmarks to hold the industry accountable is important. But these actions should not be exclusionary and punitive to entrepreneurs and small businesses, which are regarded as the engine of America’s economy.

The U.S. Department of Treasury recently reported that small businesses created over 70 percent of net new jobs since 2019. They also note that entrepreneurship continues to surge, as the United States is averaging 430,000 new business applications per month in 2024, 50 percent more than in 2019.

The crypto industry was built by entrepreneurs, innovators and founders. They should not be curtailed by compliance roadblocks now that a robust global market has evolved. New York State’s extreme BitLicense is a stark example of how startups are locked out when rulemakers narrowly create market guidelines with only large players in mind, at the detriment of smaller entities.

The rules of the road should be inclusive and not a one-size-fits-all proposition. Of course, there are hurdles. We need more data to provide a clearer understanding of crypto startups in order to determine thresholds for micro-enterprises. But we can compile this research from impact funds, accelerators, and venture capitalists. Additionally, increasing access to capital for founders in emerging tech is pro-business and vital to making sure the little guys are not set up to fail. For example, earlier this year Dan Romero’s Web3 startup, Farcaster, surged after they received support from investors.

Congress has a real opportunity to develop a framework where size is not a handicap. Policymakers can advance measures to spark market competition and fuel growth in the 21st century innovation economy.

It is already challenging for some builders, many of which are leveraging the technology to solve economic problems. Diverse developers, like Guapcoin’s Tavonia Evans, have long struggled to get their products listed on decentralized exchanges. So, enforcement of the Securities and Exchange Commission’s Fair Access Rule to ensure equity for startups is paramount. Even securing a money transfer license can be difficult for the founders who are able to secure funding but still can’t afford to have specialized securities attorneys and accountants on retainer.

Acquisition was the pathway Karen Hsu had to take in order to scale her risk and fraud detection company. And for Pryce Yebesi, a co-founder of Utopia Labs who has raised over $20 million for his ventures, the crypto market may be out of reach if Washington is not willing to prioritize micro-entities as it deliberates the appropriate infrastructure for the future of decentralized business in the United States.

The 2024 elections ushered in a new generation of legislators who understand the benefits of blockchain technology and value of digital assets. They will have support from a Trump White House that is bullish on crypto, which will shift the policy landscape.

I call on the incoming 119th Congress to think small when it comes to market structure legislation in order to catalyze an inclusive, compliant, and competitive crypto sector.

Cleve Mesidor previously served in the Obama Administration and in Congress.

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