Has a Congressional consensus emerged on crypto? Not quite.
But the broad feeling among members of Congress in attendance was that a hearing before the Joint Economic Committee (JEC) on November 17 was at the very least educational — which was apt, given that the hearing's title was "Demystifying Crypto."
The witnesses came from a range of backgrounds, but they broadly agreed on the importance of maintaining key privacy features in existing cryptocurrencies. There also seemed to be a fairly strong acceptance of the notion that centralized crypto exchanges needed to step up tax reporting and transparency on their data, as well as user information — though the regulatory entity that should be responsible was a matter of disagreement.
Nonetheless, an established partisan divide on crypto was on display.
As Representative Don Beyer, the chairman of the committee, described it to The Block in a follow-up interview:
“You have the structure of the debate already, which is that the Republicans are going to want as light a touch as possible, arguing that all the structures are already in place to make sure there's not fraud. And on the other hand, you have the Democratic witnesses who are more like, ‘hey, we really got to make sure the stablecoins are vetted and don't run out of cash. We need to make sure that people can't go to the unreported exchanges and avoid taxes.’”
Beyer, himself a Democrat representing Northern Virginia, is also behind the Digital Asset Market Structure and Investor Protection Act, which he introduced this summer.
In a concise encapsulation of that republican perspective, Senator Mike Lee, the leading Republican on the committee, warned: “Rigid one-size-fits-all regulation is something that’s kind of scary.”
As a joint committee, the JEC includes members from both houses of Congress. Broadly, the Democratic members were more likely to defer to the Open Markets Institute’s Alexis Goldstein. Goldstein, for example, explained what a DeFi rug pull was, using the example of the recent “Squid Game” token dump.
“I have used large exchanges, I have tried out so-called decentralized finance, or DeFi,” said Goldstein, cautioning against industry optimism. “While many claim this is the future of finance, the space looks a lot like the history of finance to me.”
More of a go-to for questions from Republicans, Peter Van Valkenburgh, who leads research at non-profit cryptocurrency advocacy group Coin Center, cast cryptocurrencies as part of a tradition of American openness.
“America grew rich because of that openness,” he said. “We don’t like permissioned systems in this country because we know that you can’t prejudge genius.”
In the end, there were relatively few points of regulation on which the four witnesses disagreed, but they are familiar elements of regulatory debate. All agreed that there needed to be more tax clarity, but there was disagreement over, for example, the value of adjusting or repealing the broker definitions in the infrastructure bill.
Spot market oversight was also a major point. Former Chair of the Commodity Futures Trading Commission Tim Massad was in favor of expanding the CFTC’s regulatory power over spot crypto markets, which it lacks because more traditional commodities — oil, wheat, cattle, for example — operate so differently.
“Coinbase, Kraken, others — they’re not subject to the same standards,” said Massad. “[The CFTC] has very limited power to make fraud actions, but that takes a lot of resources to do.”
Kevin Werbach of the University of Pennsylvania’s Wharton School dismissed the idea that regulation would kill the crypto industry. “Regulation can promote trust. There’s a reason why our capital markets are so successful,” he said.
Werbach was especially interested in seeing more direct oversight of stablecoin issuers, another critical area for current debates on crypto regulation.
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