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Representatives from the cryptocurrency industry testify in front of Congress

Cryptocurrencies have made exceedingly poor headway on making the case for custom laws before politicians, despite their goals to speed up the workings of financial infrastructure in the United States. Representatives from the crypto industry tried again on Dec. 8, 2021.

While pushing Congress to create a “one unified framework” for regulation, cryptocurrency industry members also requested that the legislative body draft regulations that are distinct from the existing framework in order to ensure that innovation thrives in the crypto ecosystem. Nearly 40 politicians asked questions about various elements of cryptocurrency, according to online site Coindesk.

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Representatives from the cryptocurrency industry testified before Congress, requesting that crypto be governed by a single framework overseen by a federal regulator.

Representatives’ questions demonstrated a shift in attitude from skepticism to interest in crypto’s potential to revolutionize the country’s financial system.

The wide range of questions posed by members of Congress demonstrated the potential impact of cryptocurrencies on the financial system.

Another Attempt at Cryptocurrency Understanding

Yesterday’s session was another attempt by regulators to have a better understanding of an asset class that has risen in prominence as a result of the temporary shutdown.

Since March 2020, cryptocurrency has grown in stature and relevance, from a laughingstock to a vital part of the financial ecosystem. Institutional investors hungry for returns in a low-interest rate environment hurried to take advantage of the asset class’s volatility, while retail investors flush with stimulus money and leisure time poured money into it. Both have aided in pushing the total market valuation of cryptocurrency exchanges beyond $2 trillion, up from around $225 billion in the days leading up to the government shutdown.

Representatives’ attitudes toward the asset class have also shifted from skepticism to a more nuanced view, in which the legislative body appreciates the industry’s ability to disrupt the financial system. “I’m blown away by your talent. At yesterday’s session, Rep. Pete Sessions (R-Texas) told the witnesses, “I see a lot of inventiveness, a lot of entrepreneurial spirit.”

The utility of cryptocurrencies within the existing financial framework was the focus of regulators’ questions at the hearing. Rep. Gregory Meeks (D-NY), for example, wants to know more about the potential of cryptocurrencies as a vehicle for financial inclusion through minority depository institutions. Meanwhile, Rep. Alexandra Ocasio-Cortez (D-NY) was interested in learning more about the role of stablecoins in the cryptocurrency ecosystem.

Others were more concerned about how they might affect the dollar’s primacy as a reserve currency and the Federal Reserve’s economic strategy. Brian Brooks, chief executive officer of bitcoin mining company Bitfury, responded to a question from Rep. Blaine Luetkemeyer (R-MO) by pointing to the overall decline in the influence of other world currencies and saying that a “internet-enabled” US dollar will enable the currency to compete with others based on features and utility. He also stated that the availability of a competing digital currency would keep the Federal Reserve’s monetary policy on the dollar in check.

Stablecoins, which are likely the fastest-growing sort of cryptocurrency, were also a hot topic at yesterday’s session. The Treasury-led President’s Working Group (PWG) recently produced a study on stablecoins, recommending that organizations that issue them be regulated in the same way that depository institutions are. Jeremy Allaire, the CEO of stablecoin issuer Circle, told reporters that he did not agree with all of the findings of the research. “I agree with a lot of things, but not all of them.” He asked for additional clarity on the form a federal charter for a stablecoin-issuing organization will take, saying, “I believe there are a number of issues in the study.”

Cryptocurrency Legislation

Many politicians were interested in learning more about the regulatory framework that surrounds the bitcoin economy. Regulatory agencies in the United States have consistently slowed the rise of cryptocurrencies in the country, even as their counterparts in Europe and Asia are warily accepting the asset class into their financial ecosystems. Rep. Bill Huizenga asked, “What Rubicon have they crossed (in their grasp of crypto)?” (R-MI).

According to Brooks of Bitfury, these governments recognized that cryptocurrency is a risk-on asset, which means it is intended for investors who are willing to take risks. He stated, “We are the last country remaining that hasn’t figured it out.”

Cryptocurrencies’ “risk-on” nature is reflected in their price volatility, which has become a source of concern for US regulators. SEC Chairman Gary Gensler has previously stated that crypto markets are like the Wild West, and has urged that cryptocurrency exchanges, which account for the majority of spot trading and set pricing for crypto derivatives, be brought under his jurisdiction.

Representatives from the cryptocurrency industry urged for a “single, consistent framework” to oversee the asset class at yesterday’s hearing. Different agencies are currently in charge of regulating cryptocurrency products and services. As a result, crypto entrepreneurs must jump through several hoops in order to get their products to market. To provide their services, bitcoin exchanges, for example, must register as money transmitters in each state.

Existing institutions like the Commodities and Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) should play responsibilities in such a framework, according to Sam Bankman-Fried, CEO of FTX, one of the world’s largest crypto trading exchanges by volume (SEC).

“Under a new regulatory framework, Congress should acknowledge cryptocurrencies,” said Alesia Haas, Coinbase’s chief financial officer. According to Haas, the crypto ecosystem’s middlemen, including as exchanges, should be regulated by the federal government.

What do you think?

Written by Jordana Williams

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