The first time Jacob Smagula walked into a Bitcoin mining facility, he wasn’t there to write policy memos or debate regulatory frameworks. He was knee-deep in the hum of servers, the acrid tang of electricity, and the relentless thrum of machines churning out hashes in a race against the clock. That was 2021, when MARA—one of the most aggressive players in North America’s Bitcoin mining boom—was still betting big on the idea that crypto could be both a speculative asset and a legitimate industrial powerhouse. Five years later, Smagula isn’t mining anymore. But his boots are now firmly planted in the halls of Washington, D.C., where he’s trading server farms for spreadsheets, and the noise of blockchain for the quiet calculus of Capitol Hill.
This isn’t just another story about a crypto veteran pivoting to policy. It’s a case study in how the most chaotic corners of the digital economy are now reshaping the machinery of governance. Smagula’s move from MARA to the American Institute for Policy Research (AIP)—a believe tank quietly building influence in the intersection of DeFi, regulatory tech, and congressional politics—marks a turning point. The question isn’t whether crypto will dominate Washington’s agenda (it already does). It’s whether the people shaping that agenda understand the terrain well enough to avoid repeating the mistakes of the last cycle.
The Man Who Saw the Crypto Winter Coming
Smagula’s background is a masterclass in how the crypto industry’s boom-and-bust cycles force unexpected career detours. Before MARA, he worked in Bitcoin mining’s early days, when the sector was a mix of tech bro idealism and cutthroat capitalism. By the time he joined MARA in 2020, the company was already a bellwether for the industry’s excesses: backed by Mike Novogratz’s Galaxy Digital, it was expanding mining operations at a pace that ignored the very real risks of energy volatility, regulatory crackdowns, and the looming specter of a market correction.
Then came the crash. When Bitcoin’s price collapsed in late 2022, MARA’s stock—then trading at over $10—plummeted by 90% in a matter of months. The company’s pivot to hosting services for institutional players was a desperate attempt to stay relevant, but by then, the damage was done. Smagula, who had spent years navigating the industry’s high-stakes gambles, found himself on the outside looking in—as an observer, not a participant.
That’s when he made the leap to AIP, where his role as a research fellow in the DeFi Policy Initiative is less about mining algorithms and more about decoding them for lawmakers who still treat crypto like a Magic: The Gathering card game. “The biggest mistake policymakers make is assuming crypto is a monolith,” Smagula told Archyde in a recent interview. “Bitcoin mining, DeFi, stablecoins—these are all different beasts, and treating them the same way leads to policy disasters.”
Washington’s Crypto Blind Spot: Why the Hill Still Doesn’t Get It
The information gap here isn’t just about technical details. It’s about the cultural disconnect between the fast-moving, often lawless world of crypto and the deliberative, risk-averse institutions of Washington. Take, for example, the Financial Innovation and Technology for the 21st Century Act, a bipartisan bill introduced in 2022 that aimed to modernize crypto regulation. The bill’s sponsors—SEC Chair Gary Gensler included—assumed that clearer rules would stabilize the market. What they didn’t account for was how quickly the industry would outpace those rules.
Consider the case of FTX’s collapse in November 2022. The fallout wasn’t just a financial meltdown; it was a regulatory wake-up call. Yet, by the time Congress held hearings, the crypto winter had already reshaped the landscape. Exchange tokens had been rebranded as “security tokens,” DeFi protocols had quietly migrated to offshore jurisdictions, and mining operations—once the darlings of institutional investors—were being sold off at fire-sale prices.
“The Hill moves at the speed of a committee vote,” says Sarah Granger, a former Treasury Department official now advising AIP on crypto policy. “But crypto moves at the speed of a tweet. By the time a bill is drafted, the industry has already moved on to the next thing.”
“The biggest mistake policymakers make is assuming crypto is a monolith. Bitcoin mining, DeFi, stablecoins—these are all different beasts, and treating them the same way leads to policy disasters.”
The DeFi Policy Playbook: How AIP Is Rewriting the Rules
AIP’s approach is less about drafting new laws and more about educating the educators. Smagula and his team are focused on three key areas where crypto’s real-world impact clashes with Washington’s traditional frameworks:
- Regulatory Arbitrage: How DeFi protocols exploit jurisdictional loopholes to avoid oversight. (Example: MakerDAO’s $6 billion in collateral is spread across 12 different legal entities, none of which are directly accountable to any single regulator.)
- Energy and Infrastructure: The unintended consequences of treating crypto mining as a “green energy” solution. (Spoiler: It’s not. Bitcoin’s energy consumption now exceeds that of entire countries like Argentina.)
- Stablecoin Dominance: Why Tether and Circle’s USDC aren’t just competing with the dollar—they’re replacing it in key markets. (In 2023, stablecoin transactions surpassed $1 trillion, with over 60% happening outside traditional banking systems.)
Smagula’s perform at AIP is part detective story, part policy memo. He’s mapping how crypto’s decentralized nature creates centralized risks—like the $2 billion in funds lost to hacks in 2022 alone. His team’s research suggests that the biggest threat to financial stability isn’t rogue traders or unchecked speculation—it’s the regulatory vacuum that allows poor actors to operate with impunity.
The Winners and Losers in Washington’s Crypto Gamble
Who stands to gain from Smagula’s transition from miner to policymaker? And who might get left behind?
| Winners | Losers |
|---|---|
| Institutional Investors Hedge funds and asset managers who survived the crypto winter now have a direct line to lawmakers. Their lobbying efforts are more effective when they’re backed by “expert” testimony from figures like Smagula. |
Retail Investors The average crypto trader has no seat at the table. Meanwhile, SEC enforcement actions against retail-focused platforms (like Coinbase) are increasing. |
| RegTech Startups Companies like Chainalysis and CipherTrace are positioning themselves as the “compliance layer” for crypto. Their stock has surged as Congress scrambles for solutions. |
Small Miners Independent operators who can’t afford the energy costs or regulatory hurdles are being squeezed out. Mining difficulty has risen 600% since 2020, making small-scale operations unviable. |
| Think Tanks (Like AIP) Organizations that can bridge the gap between tech and policy are becoming the new power brokers. AIP’s funding has tripled since 2023, thanks to donations from crypto-adjacent VC firms. |
Traditional Banks Even as they’ve been lobbying for crypto custody licenses, their slow-moving bureaucracies are ill-equipped to compete with DeFi’s speed. Federal Reserve data shows banks are still losing market share to crypto-native financial services. |
The Next Crypto Winter: What Washington Isn’t Talking About
Here’s the part no one’s discussing: The next crash isn’t if—it’s when. And when it comes, the real damage won’t be to Bitcoin’s price or even the stability of exchanges. It’ll be to the trust in the system that Washington is trying so hard to build.
Consider this: In 2024, the Bank for International Settlements (BIS) warned that DeFi’s lack of transparency poses a systemic risk. Yet, Congress is still debating whether crypto is “innovation” or “speculation.” The answer, as Smagula sees it, is both—and that duality is what makes regulation so difficult.
“The biggest risk isn’t that crypto will collapse,” says Dr. Perry Mehrling, a financial economist at Barnard College. “It’s that Washington will pass laws so rigid they strangle the very innovation they’re supposed to protect.”
“The biggest risk isn’t that crypto will collapse. It’s that Washington will pass laws so rigid they strangle the very innovation they’re supposed to protect.”
Smagula’s work at AIP is a microcosm of this tension. On one hand, he’s pushing for smart regulation—rules that can adapt as fast as the industry evolves. On the other, he’s warning that the Hill’s slow-motion approach could turn crypto into a regulatory black hole, where the only thing certain is uncertainty.
What’s Next? Three Scenarios for Crypto in Washington
So where does this leave us? Here are three possible outcomes, based on Archyde’s analysis of current trends:
- The “Light-Touch” Compromise: Congress passes a patchwork of state-level laws (like Wyoming’s Special Purpose Dealer License) while the SEC and CFTC continue their turf wars. Result: A fragmented regulatory landscape where big players thrive, and small innovators get crushed.
- The “China Model” (But Worse): Washington imposes heavy-handed restrictions on mining and trading, driving the industry offshore—just like China did in 2021. The difference? Unlike China, the U.S. Doesn’t have the infrastructure to replace lost revenue. IRS data suggests crypto-related tax evasion could spike by 40% if enforcement becomes too aggressive.
- The “DeFi Sovereignty” Play: The industry outmaneuvers regulators by embedding compliance into smart contracts. (Example: Chainlink’s CCIP already allows cross-chain regulatory reporting.) If this happens, Washington’s role shrinks to observer rather than arbiter.
The wild card? Smagula himself. His ability to translate crypto’s jargon into policy speak could make him one of the most influential figures in this debate. But influence isn’t the same as power. And in Washington, power still belongs to those who control the narrative—and right now, the crypto industry is still writing its own.
So here’s the question for you, reader: When the next crash comes—and it will—will Washington be ready? Or will we repeat the same mistakes, just with fancier acronyms and more lobbyist dinners?
Drop your take in the comments. And if you’re in D.C. This month, keep an eye out for Smagula. He’s the one who’s seen both sides of the ledger—and he’s not afraid to tell you which side is winning.
