CEOs of several major cryptocurrency companies made their way to Capitol Hill, where they faced a Congressional hearing. The House Financial Services Committee conducted a hearing on “Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States”.
In attendance were Samuel Bankman-Fried, CEO of FTX, one of the world’s largest cryptocurrency exchanges; Alesia Haas, CFO of Coinbase Global; Jeremy Allaire, the CEO of Circle, the issuer of the USDC stablecoin; Charles Cascarilla, CEO of Paxos, which issues the Pax Dollar (USDP) stablecoin; Brian Brooks, CEO of bitcoin-mining company Bitfury; and Denelle Dixon, the CEO of Stellar Development Foundation, a non-profit which promotes the use of Stellar, an open-source blockchain for the use of digital currency.
Here are some of the key highlights of what was said.
While the executives asked for tailor-made regulations to adapt to the growing crypto-space, they also cautioned against harsh regulations that may drive away innovation. Also on topic for discussion were stablecoins and how they worked.
The representatives, led by California Democratic Rep. Maxine Waters, the chairwoman of the committee, asked questions about some technical aspects. Rep. Waters added that the popularity of digital assets like cryptocurrencies has only grown over the pandemic and have “contributed to working families looking for alternatives to rebuild their nest egg by investing in cryptocurrency”.
"Currently, cryptocurrency markets have no overarching or centralized regulatory framework, leaving investments in the digital assets space vulnerable to fraud manipulation and abuse," she added.
On the other side of the political spectrum, Rep. Patrick T. McHenry of North Carolina spoke against hasty and strict regulations. “We don’t need knee-jerk reactions by lawmakers to regulate out of fear of the unknown rather than seeking to understand. That fear of the unknown and the move to regulate before understanding will only stifle American ingenuity and put us at a competitive disadvantage,” he said.
However, he did add that "the regulations may be clunky and they may not be up to date.”
Brian Brooks of Bitfury also spoke up about talent departing from the country towards other regions in face of strict regulations. “A surprising number of talented traders have left for Portugal, Dubai, Abu Dhabi, Singapore and other jurisdictions that are not at all unregulated but have growth,” Brooks said.
The top executives did agree that regulation would be welcome as it would clarify the position of many services and products, while also avoiding potential future conflicts between regulators and service providers.
“I think that it is coming, and I think that it is important, and I think that it is healthy that the industry will be regulated,” said Samuel Bankman-Fried. “The industry has the potential to improve a lot of people’s lives,” he added.
“Because of their nascent stage of development and unique underlying technology, digital assets trade in markets that are fundamentally different from traditional financial markets,” Alesia Haas said in her testimony. “As a result, existing regulatory regimes often do not accommodate this new technology.”
These hearings did not lead to any explosive outbursts like those seen in the ones on social media platforms, and are not likely to immediately lead to new wide-ranging legislation being drafted. Though the crypto hearing may be the starting step before smaller regulatory bills and legislations are passed to start bringing crypto assets under compliance regulations. One such bill is the proposed Token Taxonomy Act, which aims to specify that digital tokens are not securities.
The Congressional hearing comes at the point where nations are choosing whether to go the route of China by banning or restricting cryptocurrencies and digital assets completely, or to allow the nascent technology to develop like in El Salvador.