Crypto Industry Representatives Testify Before Congress

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Crypto Industry Representatives Testify Before Congress

Cryptocurrencies have made incredibly poor headway on presenting the case for custom laws before politicians, while having hopes to speed the workings of financial infrastructure in the United States. On December 8, 2021, members from the crypto sector attempted once again. 1

While pushing Congress to create a “single unified framework” for regulation, officials from the cryptocurrency sector also encouraged the legislative body to draft rules independent from the current framework to guarantee that innovation flourishes in the crypto ecosystem. According to the online magazine Coindesk, roughly 40 MPs addressed inquiries about cryptocurrency. 2

Key Takeaways

  • Representatives from the cryptocurrency business spoke before Congress, requesting a unified framework overseen by a federal regulator.
  • Congressional officials’ questions revealed a shift from skepticism to interest about crypto’s ability to rebuild the country’s financial system.
  • The broad variety of questions posed by Congressional lawmakers spoke to the potential impact of cryptocurrencies on the financial sector.

Another Attempt to Understand Cryptocurrencies

The meeting Wednesday was another effort by authorities to have a better understanding of an asset class that has grown in favor during the economic shutdown.

Since March 2020, cryptocurrency has gained in size and significance from being a laughingstock and a backwater of the financial ecosystem. Retail investors, flush with stimulus funds and free time, poured money into the asset class, while institutional investors, eager for returns in a low-interest-rate environment, hurried to capitalize on its volatility. Both have contributed to the aggregate market valuation of crypto markets surpassing $2 trillion, up from about $225 billion in the days before government shutdowns. 3

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Congressional lawmakers’ views on the asset class have also evolved, from a skeptical one to a more nuanced one in which the legislative body understands the industry’s ability to disrupt the financial landscape. “I am really impressed. I see a lot of inventiveness and entrepreneurial spirit “During yesterday’s session, Rep. Pete Sessions (R-Texas) informed the witnesses. 1

During the session, authorities focused on the usefulness of cryptocurrencies within the current financial structure. Some, such as Rep. Gregory Meeks (D-NY), wanted to know more about the potential of cryptocurrencies to be used as a vehicle for financial inclusion via minority depository institutions. Meanwhile, Rep. Alexandra Ocasio-Cortez (D-NY) was interested in the function of stablecoins in the cryptocurrency ecosystem. 1

Others were more worried about the effect on the US dollar’s dominance as a reserve currency and the Federal Reserve’s economic strategy. In response to a question from Rep. Blaine Luetkemeyer (R-MO), Brian Brooks, CEO of bitcoin mining company Bitfury, cited the overall decline in the influence of other world currencies and stated that a “internet-enabled” US dollar will allow the currency to compete with others on features and utility. He also said that the existence of a rival digital currency would keep the Fed’s monetary stance toward the US dollar in check. 1

Stablecoins, perhaps the fastest growing sort of cryptocurrency, were also a hot topic during yesterday’s session. The Treasury-led President’s Working Group (PWG) has issued a study on stablecoins, calling for organizations that produce such coins to be regulated in the same way that depository institutions are. 4 The CEO of stablecoin issuer Circle, Jeremy Allaire, informed representatives that he did not agree with all of the report’s conclusions. “I support a variety of causes, but not all of them. I believe the study has a lot of problems “He requested further information regarding the structure of a federal charter for a stablecoin-issuing entity. 1

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Legislating Cryptocurrencies

Many politicians were curious in the architecture of legislative barriers around the cryptocurrency ecosystem. Regulatory authorities in the United States have consistently slowed the rise of cryptocurrencies in the nation, even as their counterparts in Europe and Asia welcome the asset class, if warily, into their financial ecosystems. Rep. Bill Huizenga questioned, “What Rubicon have they passed (in their comprehension of crypto)?” (R-MI).1

According to Brooks of Bitfury, these governments recognized that cryptocurrency is a risk-on asset, which means that it is intended for investors who can handle risk. “We are the only nation left that hasn’t worked it out,” he remarked. 1

This “risk-on” aspect of cryptocurrencies is mirrored in their price volatility, which has raised concerns among US authorities. SEC Chairman Gary Gensler has already told legislators that crypto markets are like the Wild West and has pushed to put cryptocurrency exchanges, which account for the majority of spot trading and set pricing for crypto derivatives, under his jurisdiction.

Representatives from the cryptocurrency sector want a “one, consistent framework” to oversee the asset class during yesterday’s session. 1 Various authorities presently regulate cryptocurrency items and services. As a consequence, crypto entrepreneurs must jump through many hoops in order to bring their goods to market. To offer their services, bitcoin exchanges, for example, must register as money transmitters in each state.

According to Sam Bankman-Fried, CEO of FTX, one of the world’s largest cryptocurrency trading platforms by volume, such a framework should include duties for current authorities like as the Commodities and Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) (SEC).

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“Congress should acknowledge cryptocurrencies under a new legal framework,” said Coinbase CFO Alesia Haas. According to Haas, the crypto ecosystem’s middlemen, including as exchanges, should be overseen by a federal authority. 1

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