Congress took a crash course in crypto on Wednesday, as six business executives representing a cross-section of the digital economy, including crypto exchanges, stablecoins issuers and blockchain developers, took to answered questions from the House Financial Services Committee.
The audience was notable for being the first on Capitol Hill to focus exclusively on cryptocurrencies. As a result, much of the nearly five-hour hearing focused on briefing Congress on key concepts and allowing lawmakers and panelists to voice concerns about how to future regulations could shake up the industry.
“The goal today is to listen, learn and ask questions,” said North Carolina Representative Patrick McHenry, the ranked Republican on the committee, who has generally been in favor of the industry.
However, in addition to educating lawmakers, executives had a clear agenda. They stressed that crypto companies are ready to be regulated, but the industry deserves its own regulatory framework with a designated agency, rather than being subject to existing rules.
“Without tailored legislative solutions that are openly debated with public participation, the United States risks unnecessarily onerous and frightening laws and regulations,” said Alesia Jeanne Haas, chief financial officer of Coinbase Global Inc., a major exchange of crypto, during his testimony.
Panelists also pointed out that parts of the industry are already regulated.
“I think it’s healthy that the industry is regulated,” said Samuel Bankman-Fried, CEO of FTX, another crypto exchange. “I think it is also already regulated in a number of ways.”
Despite the industry’s openness to regulation, lawmakers have expressed broader concerns about the crypto market, such as whether it is particularly prone to fraud and manipulation, and how the growth of crypto assets could present new systemic risks and challenge the US dollar.
“Currently, cryptocurrency markets do not have a comprehensive or centralized regulatory framework, which makes investments in the digital asset space vulnerable to fraud, manipulation and abuse,” said Representative Maxine. Waters (D-Calif. 43rd District), Democratic chair of the committee.
Leaders have often responded by outlining the benefits of a more decentralized financial and monetary system. These include reducing the cost of money transfers, speeding up transactions, and eliminating the need for central clearing houses, according to the panelists.
“Soon we believe dollars on the Internet will be as effective and widely available as texting and emailing,” said Jeremy Allaire, CEO of Circle, a major stablecoin issuer.
They also noted that decentralized finance can help remove risk factors such as greed, neglect, and even prejudice in the financial system; in other words, the human element.
“Digital assets can also reduce bias in finance,” said Charles Cascarilla, CEO and co-founder of Paxos Trust Company, a blockchain technology company. “Basically, blockchain is just a mathematical equation. It is independent of a user’s race, gender, nationality or income.”
Responding to a question about protecting consumers from risk, Brian P. Brooks, CEO of the Bitfury Group, said it’s best to let more people enter the market, thereby increasing liquidity and membership through the economy, than trying to push them out of the market for their own safety. He pointed to the reluctance of US regulators to approve a crypto mutual fund or an exchange-traded fund.
“We don’t allow crypto mutual funds,” he said. “We don’t allow people to diversify like they do in Canada, Germany, Singapore, the United Arab Emirates and a range of regulated economies around the world. I would say the way to win is to get more people into the system in a more secure way, so you don’t keep them out at their peril. ”
On the issue of the volatility of the crypto market, Brooks added that it will pass over time.
“Much of the price volatility of cryptocurrency has to do with the early stage of the market and the lightly traded nature of assets relative to, say, US real estate or global stocks or something like that. “