On Dec. 8, top executives from six major crypto companies faced the United States House of Representatives’ Financial Services Committee during a special hearing on digital assets. While the tone of the conversation was largely proclaimatory, the industry reacted with an optimistic buzz — it seems that crypto is bound to become a hot topic on the Hill for years to come.
The meeting that took place in Congress also garnered much attention from mainstream media. What’s notable is the fact that this hearing is the first time that the industry’s senior leaders (aka “crypto moguls”) directly expressed the fears and hopes of the $2.2-trillion sector to U.S. legislators.
The industry representatives who were summoned to testify at the hearing included Jeremy Allaire, CEO of Circle; Sam Bankman-Fried, CEO of FTX; Chad Cascarilla, CEO of Paxos; Denelle Dixon, CEO of the Stellar Development Foundation; Brian Brooks, CEO of Bitfury; and Alesia Haas, chief financial officer of Coinbase.
Some of the key legislators who actively engaged with the crypto industry captains were Representative Pete Sessions, a Republican from Texas; Rep. Maxine Waters, a Democrat from California; Rep. Gregory Meeks, a Democrat from New York; Rep. Brad Sherman, a Democrat from California; Rep. Patrick McHenry, a Republican from North Carolina; Rep. Blaine Luetkemeyer, a Republican from Missouri; and Senator Sherrod Brown, a Democrat from Ohio.
So, here’s how it went down on the big day.
Allaire supported this point with an example from his firm’s operations: “Just in the past several weeks, Circle has signed on institutional customers who are using these services for small-business payments, international remittances and efficient payments for remote workers.” As he optimistically stated, soon “Dollars on the internet will be as efficient and widely available as text messages and email.”
Brooks took the message even closer to key political tensions of the day as he emphasized the opposition between tech behemoths such as Meta (formally Facebook) and the decentralizing impulse of crypto:
At the center of the CEOs’ narrative was the humanitarian significance of digital assets and their developmental potential. Cascarilla framed crypto as a “really powerful tool for democratization of access.”
The point of crypto is to have true decentralization, and the projects that succeed will be the projects that achieve that. Bitcoin succeeded because there were literally millions of participants in the node network, and so there is no CEO of Twitter to deplatform you, there’s no CEO of JPMorgan to take away your credit card.
It was also Brooks who laid out the powerful promise of the blockchain-powered Web3 era.
Aside from the fiery rhetoric, the message from the industry leaders was crisp and straightforward: It’s about time to bilaterally reconsider the rules of the game and put an end to the government’s suspicious paternalism. The industry is still being overseen by several federal agencies, state-by-state regulation is a mess, and the Securities and Exchange Commission is trying to hold its grip, characterizing digital assets as securities.
The last point was clearly emphasized as the main problem: Coinbase’s Haas proposed deeming blockchain-based tokens as digital property or a way to record ownership, which would put them outside of the SEC’s jurisdiction.
Brooks didn’t spare words when highlighting the dysfunctional patterns of the current situation: “What happens in the United States is you have a new crypto project, and you walk into the SEC, and you describe it in great detail, and you ask for guidance, and they say, ‘We can't tell you’ and ‘You list it at your own peril.’”
The Dec. 8 hearing once again brought out a division regarding crypto-related issues that exists along party lines. Democrats focused their attention on investor protection and volatility, framing the industry as a potential threat to both uninformed investors and the global economy (environmental concerns were also mentioned.)
“Currently, cryptocurrency markets have no overarching or centralized regulatory framework, leaving investments in the digital assets space vulnerable to fraud, manipulation and abuse,” as Waters, who chairs the Financial Services Committee, put it.
Sherman, one of the industry’s most consistent critics, expressed this anxiety in a quite vague, if not cryptic, form: “The powers in our society on Wall Street and in Washington have spent millions, and are trying to make billions or trillions, in the crypto world.”
Republican legislators, who — following a decades-old pattern of the American electoral system — are projected to win the majority in Congress in the next midterm elections, demonstrated a pragmatic approach.
In the words of McHenry, who is poised to chair the Financial Services Committee if the GOP wins back the House:
This technology is already regulated. Now, the regulations may be clunky, they may not be up to date. I ask my friends, my policymaker friends here on the Hill, this question: Do you know enough about this technology to have a serious debate?
Sessions went even further and gave an outright cheer to the industry, uttering a promise to support it: “I am tremendously impressed that from what I see, a lot of the ingenuity, a lot of entrepreneurial spirit, and lots of advice about the future, about where this can grow, is, I think, very important for us to listen to.”
Despite certain disagreements between legislators, the hearing sparked a largely positive reaction from the crypto community, with Jake Chervinsky, head of policy at the Blockchain Association, calling it “the most positive, constructive, & bipartisan public event on crypto I’ve seen in Congress” and other experts largely projecting similar vibes.
Some representatives also projected an empathic epigraph in the aftermath of the hearing. Perhaps the most eloquent reaction belongs to Meeks, who demonstrated a moderate optimism toward the industry’s future:
The silence of crypto critic Sherman, normally an active Twitter user, was also notable.
The overall optimistic mood of the hearing stands in contrast to some of the recent regulatory actions taken by the U.S. government. For one, the SEC denied WisdomTree’s application for a spot Bitcoin exchange-traded fund after seven months of consideration, keeping it impossible to invest in a regulated financial product providing direct exposure to the world’s oldest cryptocurrency.
Surely, the hearing will not be the last turn in the crypto-government conversation, even for 2021. Already, a hearing on stablecoins took place before the Senate Banking, Housing and Urban Affairs Committee on Dec. 14.
As Representative McHenry put it, “Congress must work to fully understand and embrace these innovative new technologies, like #crypto.” It looks like everyone should brace for a busy 2022 in crypto policy and regulation.