On December 8, top executives of the cryptocurrency industry testified before the US House Financial Services Committee. Politicians’ views on the sector were divided, but the witnesses noted a high level of engagement from members of Congress.
The hearing’s agenda on the topic of “Digital assets and the future of finance: understanding the challenges and benefits of financial innovation” centred on questions about bitcoin exchanges, the issuance of stablecoins, regulatory challenges surrounding digital assets, and the policy stance of federal agencies.
At the hearing testified: Circle CEO Jeremy Allaire, FTX CEO Sam Bankman-Fried, Bitfury CEO Brian Brooks, Paxos CEO Charles Cascarilla, Stellar Development Foundation CEO Denelle Dixon, and Coinbase Global CFO Alesia Haas.
While past hearings had largely focused on Bitcoin’s use in criminal activity, this time policymakers asked about the underlying technology and the potential of digital assets.
“Web 3.0 could expand opportunities for everyone,” said a representative for Anthony Gonzalez.
He noted that regulators’ inability to reach a consensus on overseeing the crypto markets hampers industry development. Industry representatives agreed with the politician and urged Congress to clarify the powers of agencies such as the SEC and CFTC, and to allow stablecoin issuers to become part of the existing banking system.
“If a sizeable number of consumers want to invest in a Bitcoin ETF, why are we prohibiting it?”
Stahl also addressed Allaire — and asked CFO Alesia Haas whether Coinbase had tried to learn from the SEC why the agency threatened to sue it if it launched crypto-savings accounts.
“We asked, but we still haven’t received a clear answer as to why our product cannot be released,” she replied.
Expressing concerns about mining’s environmental impact, as well as insufficient ethnic and gender diversity in industry firms, Democratic lawmakers highly valued the potential of cryptocurrencies, calling them a cheaper alternative to the existing banking system.
However some participants expressed more radical views. Representative Brad Sherman accused the industry of a “disrespectful attitude” toward authority and said the sector enjoys support from influential figures on Wall Street.
Sherman rebuked Coinbase for Haas’s representation rather than its head Brian Armstrong, and suggested Armstrong would ultimately have to testify, as Meta CEO Mark Zuckerberg did.
The politician also urged regulators to “protect investors” if Congress cannot pass meaningful legislation in this area.
Bitfury CEO Brian Brooks, who previously headed the OCC, urged Congress not to confine the industry to its investment aspect. He stressed that the existing financial system is not without flaws, and that blockchain could fix them.
“Shouldn’t we take this possibility seriously? Open-source algorithms and software that eliminate human error, greed, negligence, fraud and bias from the system could make it better. Even if new risks emerge that must be studied and regulated,” he said.
Allaire agreed, adding that cryptocurrencies could address many of the problems the Congress has already identified:
“The number of people worldwide without access to banking services testifies to the injustice of the financial system. Cryptocurrencies potentially could really solve this problem.”
Representative Alexandria Ocasio-Cortez noted that the blockchain architecture proposed by the industry does not resemble a new financial system but rather an “expansion” of the existing one. She put the question to Jeremy Allaire, who testified after the FTX chief.
“I truly believe we are building a new level of global economic infrastructure,” he replied.
After the hearings Allaire described the level of political engagement as “very high” and noted a willingness to engage. He said he was pleased with the hearing, because he saw in Congress a “genuine desire to consider and address some of the critical questions.”
5/6 It was also encouraging to see the aligned perspective from many that testified, and a consistent view about the need for risk-appropriate, clear and direct rule-making that considers what is unique about digital assets and stablecoins.
— Jeremy Allaire (@jerallaire) December 8, 2021
“In some respects, I think this was a turning point in political engagement around this critical area of economic infrastructure. I am confident we will see more in the future,” he concluded.
Bankman-Fried also described the hearing as “productive.” He said he expected to meet with a hostile attitude but instead participated in a useful discussion.
2) I came in expecting some hostility and grandstanding, but instead found the discussion to be by and large productive and helpful. I’m excited to keep engaging with lawmakers and regulators to refine the regulatory landscape.
For more thoughts: https://t.co/6uWCYN7Kbu
— SBF (@SBF_FTX) December 8, 2021
Lawyer Jake Chervinsky called the hearing the most positive, constructive and bipartisan public event he has seen in Congress. He called the hearing evidence of the effectiveness of industry and community engagement in Washington.
Today’s HFSC hearing was the most positive, constructive, & bipartisan public event on crypto I’ve seen in Congress — ever. I mean that literally.
It’s a testament to the effectiveness of industry & community engagement in DC in recent months. We’ve made shockingly big progress.
— Jake Chervinsky (@jchervinsky) December 8, 2021
As reported in November, the US Senate requested information from stablecoin issuers about how they operate.
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