WASHINGTON—Cryptocurrency chief executives appeared earlier than Congress Wednesday to argue that their applied sciences maintain promise for the longer term, as lawmakers and regulators wrestle with how one can deliver the more-than-$2 trillion market underneath authorities oversight.
The Home Monetary Companies Committee, led by
Rep. Maxine Waters
(D., Calif.), known as the listening to in hopes of enhancing lawmakers’ understanding of crypto belongings and the way the sector matches into present laws.
Senior executives from stablecoin issuer Circle Web Monetary Ltd., crypto exchanges
Coinbase Global Inc.
and FTX Buying and selling Ltd., bitcoin-mining agency Bitfury Group Ltd., cryptocurrency-payments system Stellar Improvement Basis and blockchain agency Paxos Belief Co. are testifying. The executives goal to tout what supporters consider to be the potential upsides of crypto and blockchain know-how whereas enjoying down the dangers highlighted by many coverage makers and consumer-protection advocates.
“The trade has the potential to enhance lots of people’s lives,” FTX Chief Government
Sam Bankman-Fried
instructed lawmakers. He famous the present system leaves many with out entry to banking. “Cryptocurrencies do present a possible option to deal with plenty of these points.”
Ms. Waters, nonetheless, raised considerations concerning the crypto trade’s relative lack of regulation. “At the moment, cryptocurrency markets don’t have any overarching or centralized regulatory framework, leaving investments within the digital-asset house susceptible to fraud, manipulation and abuse,” she stated Wednesday.
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Because the crypto trade builds out its lobbying presence in Washington, it has discovered extra allies within the GOP than amongst Democrats. The highest Republican on the financial-services committee, Rep.
Patrick McHenry
of North Carolina, echoed trade lobbyists’ warning Wednesday that extreme regulation of cryptocurrency may push technological innovation to different nations, leaving the U.S. at an obstacle.
“We don’t want knee-jerk reactions by lawmakers to control out of concern of the unknown reasonably than looking for to grasp,” he stated. “That concern of the unknown and the transfer to control earlier than understanding will solely stifle American ingenuity and put us at a aggressive drawback”
The executives additionally argued that cryptocurrencies don’t match neatly inside the present construction of U.S. monetary laws and that lawmakers ought to take into account writing tailor-made legislation for his or her trade.
“Due to their nascent stage of improvement and distinctive underlying know-how, digital belongings commerce in markets which can be essentially totally different from conventional monetary markets,” Coinbase Chief Monetary Officer
Alesia Haas
stated in her testimony. “In consequence, present regulatory regimes usually don’t accommodate this new know-how.”
Crypto supporters say that the know-how can facilitate sooner and cheaper transactions than conventional fee networks and that it has the potential to foster innovation and monetary inclusion.
“Once you take a look at the variety of people who find themselves underbanked or unbanked, each in america and globally, it’s indicative of a system that doesn’t work for everybody,” Mr. Bankman-Fried stated. “This can be a product of the intermediation concerned, it’s a product of how the bigger establishments have developed, and it’s a product of funds infrastructure that’s troublesome and clunky sufficient to make use of that it simply doesn’t work for most individuals.”
5 p.c of American adults didn’t have a bank account in 2020, in line with the Federal Reserve.
Coverage makers fear that the fast development of crypto markets poses a risk to monetary stability, that the sector is rife with fraud, that bitcoin mining wastes huge quantities of electrical energy and that criminals are utilizing cryptocurrencies to evade taxes and circumvent anti-money-laundering legal guidelines.
Oversight of crypto markets is spotty within the U.S., the place monetary regulation is cut up amongst federal and state businesses.
The Securities and Change Fee in recent times has shut down dozens of so-called initial coin offerings for promoting unregistered securities. Underneath Chairman
Gary Gensler,
who was nominated this yr by President
Biden,
the company has sought to persuade trading and lending platforms, resembling Coinbase, to register as securities exchanges.
However the two largest cryptocurrencies by market cap—bitcoin and ethereum—are thought-about by many specialists to be commodities reasonably than securities, which means they seemingly fall outdoors the SEC’s jurisdiction. Whereas the Commodity Futures Buying and selling Fee regulates derivatives markets for commodities, its authority is extra restricted relating to the underlying devices.
“There are gaps in our system,” Mr. Gensler stated Tuesday at The Wall Road Journal CEO Council Summit.
—Alexander Osipovich and Caitlin Ostroff contributed to this text.
Write to Paul Kiernan at paul.kiernan@wsj.com
Corrections & Amplifications
Alesia Haas is Coinbase’s Chief Monetary Officer. An earlier model of this text incorrectly stated that she was CEO. (Corrected on Dec. 8)
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