Set aside physics: Parachute into SmartCon, the summit hosted by Chainlink Labs, a driving force behind the development of DeFi protocols, and you, like me, might witness a blockchain-oriented subsector at odds with itself, or, at the least, speaking in two registers. 

The fashion choices: Plenty of plain-colored suits, sure, but also some flashier, more crypto-bro-y fits. A warlock wanders around the expo hall, ambulating between the cotton candy station and the S&P Global Market Intelligence booth. A conferencegoer sits in the front row of a fireside chat with David Mills of the Federal Reserve Board — all while donning sunglasses and a Doge-covered onesie. 

The rhetoric: Limitless talk of “TradFi” migrations onto the blockchain, of inevitability, of growing up; but, occasionally on stage and more frequently among rank-and-file attendees, the shilling of one speculative coin over another, the deployment of “narrative” and “community” to explain a cryptocurrency’s buoying market cap and prospects. 

This year’s SmartCon took place against the backdrop of several transitions. We’re in New York — at the Metropolitan Pavillion in Chelsea — where a majority of voters just cast their ballot for democratic socialist Zohran Mamdani. To Chainlink founder Sergey Nazarov, that electoral outcome is foreboding. 

“You just had a communist mayor [elected],” he said in reference to Mayor-Elect Mamdani, who is a self-proclaimed democratic socialist (not communist). “Like, God knows what’s going to happen next… Who knows — lizard people?”

The derision was sweeping and dismissive but also intended to make a larger point. The crypto industry is desperate to get a crypto market structure bill over the finish line in Congress, and, if drafting flows into the new year, it may get swept up in the politicking and shifting winds that come with midterm elections. Scuttlebutt suggests some prominent SmartCon figures linked up with pro-crypto Congressman Ritchie Torres, D-NY, on Tuesday evening; he’s facing intra-party headwinds of his own. Of course, it’s especially difficult to “administration-proof” crypto’s current political favor through legislation — to borrow the phrasing of crypto lobbyist Cody Carbone, CEO of The Digital Chamber — during a government shutdown.

Carbone spoke alongside fellow industry lobbyists Ji Kim of the Crypto Council for Innovation as well as Summer Mersinger of The Blockchain Association. Offering a Beltway insider’s view, Mersinger said the shutdown has freed up staffers’ time, letting relevant staffers focus on crypto market-structure legislation more diligently. Carbone added that Gary Gensler was at the helm of the Securities and Exchange Commission (SEC) just 10 months ago; “things can change quickly,” and we’re now seeing a “crypto sprint” among Trump-appointed regulators, but market structure legislation is the grand prize. 

And then there’s the whole “the Trump family is enriching itself to the tune of billions of dollars through crypto” side of things, which could stand to seriously hamstring the industry’s normalization through legislation. The Senate Agriculture and Banking Committees are in the final stages of drafting their respective parts of a crypto market structure bill that is unlikely to ever become law if the current political climate holds. Republicans lack enough votes to get the bill over the finish line on their own (barring an end to the filibuster). Dems are unlikely to vote on a bill that fails to meaningfully address conflicts of interest stemming from elected officials’ family members, such as the involvement of Eric Trump and Donald Trump Jr. in crypto ventures like World Liberty Financial. Republicans are profoundly unlikely to acquiesce to that kind of provision, setting things up for a stalemate lacking a compromise that can be convincingly packaged as a win for both sides. (Would the average blue-state voter say, “Sure, the Trumps can make billions off crypto as long as we get a Dem seat or two on the Commodity Futures Trading Commission”? I doubt it.) 

Well, the White House has an incentive to force through market structure legislation insofar as its enactment promises to buoy World Liberty’s place in finance. In a fireside chat, Corey Caplan, CTO of World Liberty Financial, outlined the company’s long-term vision, which includes serving as Visa-esque rails for an entire crypto ecosystem. World Liberty thinks traditional financial institutions will eventually migrate their activities onto the blockchain.

“We think that the status quo is going to eventually go away with stablecoin-dominated rails,” he said. “And we want to see World Liberty DeFi and USD1 be one of the dominant payment conduits for facilitating and bringing that future to life.”

He positioned World Liberty, curiously, as somehow more independent and “truly neutral” than other DeFi players. On the stablecoin issuers, for instance, he pointed out that Circle is “heavily tied” to Coinbase, which hampers efforts to “avoid conflicts of interest.” By contrast, World Liberty wants to serve a wide range of financial institutions/pockets of crypto through its neutrality, and to that end, isn’t looking to build a blockchain or crypto exchange.

“We’re not trying to partner with just one person necessarily and then create massive conflicts of interest for all the other partners we want to work with,” he said with a straight face.

Other quandaries (some evergreen, some more nascent):

• The question of decentralization versus pragmatism. Nadine Chakar, Managing Director and Global Head of DTCC Digital Assets, suggested DeFi’s proliferation can only happen through centralized and reputable institutions (like DTCC), and then might decouple from an institution thereafter. 
• The emergence of a move-fast-break-things ethos among Wall Street-facing crypto firms: Johann Eid of Chainlink said some DeFi outfits are attempting to capture market share at the expense of filiability. Sounds like a quaint way to usher in a market collapse!
• How to frame DeFi to secure lawmaker support: Sergey Nazarov of Chainlink said branding crypto as an opportunity to sustain US dominance in “global financial markets” vis-à-vis DeFi is much more likely to curry political favor than dominance in “speculative coins” vis-à-vis cryptocurrencies. The audience appeared to agree. 
• How to allow conference attendees to maintain homeostasis through a functional HVAC system. It was bone-chilling cold, goodness gracious. 

It’s not just the cotton candy-induced sugar rush: SmartCon is abuzz about developments like UBS’s tie-up with Chainlink, as well as regulators’ changing tunes — such as Federal Reserve Governor Christopher Waller’s recent remarks on the “skinny Fed master account,” where he said explicitly that “the DeFi industry is not viewed with suspicion or scorn,” which “would have been unimaginable a few years ago.” What that means for the broader market, and the systemic risk found therein, remains largely in senators’ hands.