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On Dec. 8, top executives from six major crypto companies faced the United States House of Representatives\u2019 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 \u2014 it seems that crypto is bound to become a hot topic on the Hill for years to come.<\/p>\n
The meeting that took place in Congress also garnered much attention from mainstream media. What\u2019s notable is the fact that this hearing is the first time that the industry\u2019s senior leaders (aka \u201ccrypto moguls\u201d) directly expressed the fears and hopes of the $2.2-trillion sector to U.S. legislators.<\/p>\n
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. <\/p>\n
\nthis is the first positive public hearing on crypto that I can remember<\/p>\n
congress seems to have done their homework, industry seems prepared and synchronized<\/p>\n
still not sure what stellar is doing there<\/p>\n
very bullish – could be the start of a trend<\/p>\n
\u2014 Vance Spencer (@pythianism) December 8, 2021<\/a><\/p><\/blockquote>\n
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.\u00a0<\/p>\n
So, here\u2019s how it went down on the big day.<\/p>\n
Key arguments<\/h2>\n
Allaire supported this point with an example from his firm\u2019s operations: \u201cJust 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.\u201d As he optimistically stated, soon \u201cDollars on the internet will be as efficient and widely available as text messages and email.\u201d<\/p>\n
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: <\/p>\n
At the center of the CEOs\u2019 narrative was the humanitarian significance of digital assets and their developmental potential. Cascarilla framed crypto as a \u201creally powerful tool for democratization of access.\u201d\u00a0<\/p>\n
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\u2019s no CEO of JPMorgan to take away your credit card.<\/p><\/blockquote>\n
It was also Brooks who laid out the powerful promise of the blockchain-powered Web3 era.\u00a0<\/p>\n
Aside from the fiery rhetoric, the message from the industry leaders was crisp and straightforward: It\u2019s about time to bilaterally reconsider the rules of the game and put an end to the government\u2019s 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. <\/p>\n
\nWell #crypto<\/a> community\u2026 engagement in Washington is working! I think it’s clear from today’s hearing that we’ve turned a corner. Keep building. We\u2019ll keep educating. #wagmi<\/a><\/p>\n
\u2014 Kristin Smith (@KMSmithDC) December 8, 2021<\/a><\/p><\/blockquote>\n
The last point was clearly emphasized as the main problem: Coinbase\u2019s Haas proposed deeming blockchain-based tokens as digital property or a way to record ownership, which would put them outside of the SEC\u2019s jurisdiction.<\/p>\n
Brooks didn\u2019t spare words when highlighting the dysfunctional patterns of the current situation: \u201cWhat 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, \u2018We can’t tell you\u2019 and \u2018You list it at your own peril.\u2019\u201d<\/p>\n
\nI\u2019m surprised that after the congress hearings we didn\u2019t get a pump! Today was a big day for crypto in the US! The hearings were super constructive and the senators were extremely positive! Incredible<\/p>\n
\u2014 Ran NeuNer (@cryptomanran) December 8, 2021<\/a><\/p><\/blockquote>\n
Political divisions<\/h2>\n
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.)<\/p>\n
\u201cCurrently, cryptocurrency markets have no overarching or centralized regulatory framework, leaving investments in the digital assets space vulnerable to fraud, manipulation and abuse,\u201d as Waters, who chairs the Financial Services Committee, put it.<\/p>\n
Related: <\/em><\/strong>Lines in the sand: US Congress is bringing partisan politics to crypto<\/em><\/strong><\/a><\/p>\n
Sherman, one of the industry\u2019s most consistent critics, expressed this anxiety in a quite vague, if not cryptic, form: \u201cThe 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.\u201d\u00a0<\/p>\n
Republican legislators, who \u2014 following a decades-old pattern of the American electoral system \u2014 are projected to win the majority in Congress in the next midterm elections, demonstrated a pragmatic approach.<\/p>\n
\nMy hope is that Congress will work with the digital asset market in its infancy to help Americans prosper and progress us forward as leaders on the world stage.https:\/\/t.co\/m6iKPql03Q<\/a><\/p>\n
\u2014 Pete Sessions (@PeteSessions) December 11, 2021<\/a><\/p><\/blockquote>\n
In the words of McHenry, who is poised to chair the Financial Services Committee if the GOP wins back the House:<\/p>\n
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?<\/p><\/blockquote>\n
Sessions went even further and gave an outright cheer to the industry, uttering a promise to support it: \u201cI 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.\u201d<\/p>\n
Industry response<\/h2>\n
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 \u201cthe most positive, constructive, & bipartisan public event on crypto I\u2019ve seen in Congress\u201d and other experts largely projecting similar vibes.<\/p>\n
\nToday’s HFSC hearing was the most positive, constructive, & bipartisan public event on crypto I’ve seen in Congress \u2014 ever. I mean that literally.<\/p>\n
It’s a testament to the effectiveness of industry & community engagement in DC in recent months. We’ve made shockingly big progress.<\/p>\n
\u2014 Jake Chervinsky (,) (@jchervinsky) December 8, 2021<\/a><\/p><\/blockquote>\n
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\u2019s future:<\/p>\n
\nThe future of innovation in the financial markets is inevitable.<\/p>\n
The use of digital assets can help underserved communities access additional financial tools – but we must make sure there is global coordination around regulation. pic.twitter.com\/2DbvTZKMvp<\/a><\/p>\n
\u2014 Rep. Gregory Meeks (@RepGregoryMeeks) December 8, 2021<\/a><\/p><\/blockquote>\n
The silence of crypto critic Sherman, normally an active Twitter user, was also notable.<\/p>\n
What\u2019s next<\/h3>\n
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\u2019s application<\/a> 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\u2019s oldest cryptocurrency.<\/p>\n
Surely, the hearing will not be the last turn in the crypto-government conversation, even for 2021. Already, a hearing on stablecoins took place<\/a> before the Senate Banking, Housing and Urban Affairs Committee on Dec. 14. <\/p>\n
As Representative McHenry put it<\/a>, \u201cCongress must work to fully understand and embrace these innovative new technologies, like #crypto.\u201d It looks like everyone should brace for a busy 2022 in crypto policy and regulation.<\/p>\n<\/div>\n