NEW YORK – Cryptocurrency executives went to Capitol Hill Wednesday to say their fast-growing industry understands more regulation is likely coming, but they don’t want it to squelch the next wave of the internet or send it offshore to other countries.
Leaders from major crypto exchanges, mining and other related businesses testified for four-and-a-half hours before the financial services committee of the House of Representatives, which wanted to learn more about how the industry works as it wrangles with how to regulate it. Much of the discussion centered on protections for investors in a burgeoning ecosystem that critics have called the “Wild West.”
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Questions from Congressional members ranged from 101-level discourses about what “stablecoins” are — they're digital coins pegged to the U.S. dollar or something similar to hold a stable value — to the technical and arcane. Many questions focused on how stablecoins could help the U.S. dollar hold onto its status as the world's most important currency, as well as on how digital assets could help the millions of Americans without bank accounts or at the fringes of the financial system.
How to regulate digital assets has been a thorny issue, with companies operating under a patchwork of state and federal oversight. There's still disagreement about whether the Securities and Exchange Commission or other regulatory agencies should monitor certain areas of the market, or whether an entirely new regulatory body is needed.
“Currently cryptocurrency markets have no overarching or centralized regulatory framework, leaving investments in the digital asset space vulnerable to fraud, manipulation and abuse,” said California Democratic Rep. Maxine Waters, chairwoman of the House financial services committee.
Many Republicans on the committee, meanwhile, pushed for a light touch on regulation. Tennessee Rep. John Rose, for example, asked industry executives how Congress could prevent innovation from leaving the United States and happening offshore.
“I’m optimistic that on the regulatory side, we’re not that far from that point,” said Sam Bankman-Fried, CEO of trading exchange FTX. “I think there are a few clarifications that could go a very long way here.”
He cited having a single, unified regulatory framework for the trading of actual cryptocurrencies and the futures contracts related to them, as well as having audit requirements for the reserves of stablecoins, among other things.
Alesia Haas, chief financial officer of Coinbase Global, said the U.S. government should create a new regulatory framework for digital assets. “Our existing regulatory system does not work effectively for the open, decentralized networks that crypto has created,” she said in written testimony.
The tensions are growing only bigger as the industry balloons in size and as more investors pour into the market, either because they believe in the future of crypto or because they're looking to make a quick buck. Cryptocurrencies are collectively valued at nearly $2.4 trillion, roughly the same size as Apple, Microsoft or another one of the world's biggest stocks.
“There’s something about crypto that scares people,” said Brian Brooks, CEO of Bitfury Group, one of the earliest Bitcoin miners, while saying the country doesn't need to add another regulator to watch over crypto. “I don’t know what it is, maybe it’s just because it’s new.”
Brooks was formerly the acting head of the Office of the Comptroller of the Currency, which regulates the banking industry, when Donald Trump was president.
One big criticsm lobbed at cryptocurrencies is how much electricity they devour. The mining of Bitcoin alone uses roughly as much energy in a year as all the gold mining around the world, or roughly as much as Norway or Ukraine, according to the Cambridge Bitcoin Electricty Consumption index. Only a small slice of Wednesday's discussion centered on that, though.
The executives testifying at the hearing were Jeremy Allaire, CEO of stablecoin-issuer Circle; Bankman-Fried of FTX; Brooks of Bitfury Group; Charles Cascarilla, CEO of blockchain-infrastructure firm Paxos Trust Company; Denelle Dixon, CEO of Stellar Development Foundation, which works in payments and Haas of Coinbase.