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Cryptocurrency chiefs travel to Congress for landmark hearing


The CEOs of six cryptocurrency companies testified for nearly five hours on Wednesday before the House Financial Services Committee on the promises and dangers of cryptocurrency.

The hearing was called by Representative Maxine Waters, the California Democrat who heads the committee, as part of an effort to understand fast-growing digital assets – and how to regulate them. It followed familiar partisan patterns, with Democrats expressing concern about the risks of crypto as Republicans emphasizing innovation and saying tough regulation would keep industry away from the United States.

Ms Waters expressed concern about how quickly crypto is embracing, noting that the “rapid growth” has been fueled in part by celebrity support. These digital assets currently have no “comprehensive regulatory framework” at the federal level, she said.

His Republican counterpart on the committee, Rep. Patrick T. McHenry of North Carolina, said his colleagues may not be as familiar with the technology as they should be in writing new rules: “I ask to my friends on the Hill, do you know enough about this?

In a subsequent exchange, Representative Alexandria Ocasio-Cortez, Democrat of New York, expressed doubts over executives’ arguments that crypto represented a radical overhaul in commerce and finance. “What do you say to people who say this doesn’t sound like a new financial system per se, but an expansion of the old one?” ”, She asked Jeremy Allaire, managing director of the payment company Circle.

“I truly believe that we are building a new layer of global economic infrastructure,” Allaire replied, adding that crypto needs to be integrated into the traditional financial system, creating “a hybrid model”.

Brian Brooks, acting currency controller under President Donald J. Trump and now chief executive of blockchain technology company Bitfury, has asked lawmakers to look at the decentralization crypto systems can offer and whether Americans want one Internet that puts ownership in hands. users as opposed to a few giant tech companies.

The erosion of the power of tech giants, an issue with bipartisan support in Congress, is a common argument made by crypto enthusiasts to promote the web3 – the industrial term denoting a vision for the next generation of the internet running on blockchain-based tokens. But Ms Waters asked the panel about the role of Big Techs in the crypto economy.

She told Charles Cascarilla, the boss of Paxos, that she was “concerned” about a pilot program in which her company was involved with Novi, a digital wallet created by Meta, the parent company of Facebook. Ms Waters was concerned that billions of social media users around the world would one day conduct crypto transactions using a private stablecoin, a type of cryptocurrency indexed to the value of stable assets such as than the dollar, in which Paxos specializes.

Mr. Cascarilla said the program was new and small. He and his peers sought to assure lawmakers they believe in the need for regulation and stressed that they already have to follow many rules.

Sam Bankman-Fried, the chief of crypto exchange FTX, noted that his company recently submitted a proposal to regulators suggesting a “unified joint regime” on crypto for agencies like the Securities and Exchange Commission and Commodity Futures Trading. Commission. Alesia Haas, head of the Coinbase exchange in the United States and chief financial officer of the company, said Coinbase is not necessarily calling for the creation of a new regulator but is looking for more regulatory clarity on the status of crypto.

Executives have repeatedly criticized Gary Gensler, the chairman of the SEC, who said many crypto tokens fall under the agency’s purview and should be registered as securities, which would require costs of disclosure and registration. additional compliance. Rep. Warren Davidson, Ohio Republican, said crypto law shouldn’t be an “interpretive art” and called for clear new rules.

Experts who attended the hearing said the prospects for swift legislative action were uncertain. Lee Reiners, executive director of the Global Financial Markets Center at Duke University and formerly of the Federal Reserve Bank of New York, said there would be no substantial change in the rules until there has a crypto-related financial crisis that hurts “proverbial widows and orphans.

Brett Redfearn, a former SEC director of commerce and markets who briefly worked for Coinbase this year and now advises crypto companies, said that “unlikely as it sounds, Congress should act as quickly as possible.”

Cryptocurrency is back on the congressional agenda next week: Senator Sherrod Brown of Ohio, Democratic chairman of the Senate Banking Committee, has called a hearing on stablecoins. The witness list has not been finalized.

Mr Brown said in an interview that his hearing would be a “step” towards the legislation and that he “worked together” with financial regulators like the Securities and Exchange Commission and the Department of the Treasury. “I want responsible innovation, and that means rules,” he said.