WASHINGTON–The leaders of six different cryptocurrency companies spent five hours before Congress offering their views on both the promise and the perils of cryptocurrency.
In the House Financial Services Committee hearing, aimed at providing greater understanding of the fast-growing crypto markets and how they should be resulted, Democrats generally expressed concern over crypto’s risks while Republicans emphasized innovation and suggested that strict regulation would drive the industry away from the United States.
Committee Chair Maxine Waters (D-CA), for example, said the “rapid growth” is being fueled in part by celebrity endorsements, but that the digital assets lack any “overarching regulatory framework” at the federal level.
But Rep. Patrick McHenry (R-NC) said many in Congress lack any real understanding to write new rules, stating, “I ask my friends on the Hill, do you know enough about this?”
Rep. Representative Alexandria Ocasio-Cortez (D-NY), said she had doubts around some of the executives’ arguments that crypto represents a radical reshaping of finance, asking, “What do you say to the folks that say this doesn’t seem like a new financial system per se but an expansion of the old one?”
Responded Jeremy Allaire, CEO of the payments company Circle, “I really do believe we are building a new global economic infrastructure layer.” Allaire added he believes crypto needs to be integrated with the traditional financial system so as to create “a hybrid model.”
Decentralization Discussed
Brian Brooks, the acting comptroller of the currency under President Trump and now the chief executive of the blockchain technology company Bitfury, asked lawmakers to consider the decentralization that crypto systems can offer and whether Americans want an Internet that puts ownership in the hands of users as opposed to a few giant tech companies.
The New York Times noted that eroding the power of the tech giants, “an issue with bipartisan support in Congress, is an argument commonly advanced by crypto enthusiasts to promote web3 — the industry term for a vision of the next generation of the internet run on blockchain-based tokens.”
But Waters had questions about the role of Big Tech in the crypto economy, telling Charles Cascarilla, the head of Paxos, she is “concerned” about a pilot program his company was involved in with Novi, a digital wallet created by Meta, the parent company of Facebook.
Worries Over Stablecoins
Waters said she is worried about billions of social media users worldwide someday transacting in crypto using a privately issued stablecoin, which Paxos specializes in.
Cascarilla responded by saying the program was new and small, and he joined with the other CEOs in saying they actually believe in the need for regulation and that they already have to follow a lot of rules.
The Times further reported that Sam Bankman-Fried, the chief of the crypto exchange FTX, said his company had recently submitted a proposal to regulators suggesting a “unified joint regime” on crypto for agencies like the Securities and Exchange Commission and the Commodity Futures Trading Commission.
The executives repeatedly criticized Gary Gensler, the chairman of the SEC, who has said that many crypto tokens fall under the agency’s purview and should be registered as securities, which would require extra disclosure and compliance costs, the Times reported.
Senate Hearing Next Week
Most analysts do not expect Congress to act quickly on new regulations for crypto.
However, cryptocurrency will be back on the agenda again next week in Congress when Sen. Sherrod Brown (D-OH), chairman of the Senate Banking Committee, has called for a hearing on stablecoins.