REGULATION

Successful First Battle of the Cryptocurrency Hearing! Industry Insiders Praise Legislators for Their Open-mindedness and Optimistically Look Forward to Future Cryptocurrency Regulation

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Successful First Battle of the Cryptocurrency Hearing! Industry Insiders Praise Legislators for Their Open-mindedness and Optimistically Look Forward to Future Cryptocurrency Regulation

Last night on 12/8, several industry experts in the cryptocurrency field participated in a cryptocurrency hearing held by Congress. Despite some fierce criticism from a few members of Congress and the absence of some institutional representatives, this was a valuable and constructive dialogue for the cryptocurrency industry.

Representatives in Attendance

Congressman Brad Sherman criticized Coinbase CEO Brian Armstrong for sending other representatives instead of attending in person. Tether, the largest stablecoin issuer, did not even have a representative present. Other attendees included:

  • Jeremy Allaire, CEO of stablecoin issuer Circle
  • Charles Cascarilla, CEO of stablecoin issuer Paxos
  • Brian P. Brooks, CEO of mining firm Bitfury
  • Denelle Dixon, CEO of the Stellar Development Foundation
  • Alesia Jeanne Haas, CFO of Coinbase
  • Sam Bankman-Fried, founder of the FTX exchange

Focus on Stablecoins and Exchanges

Unlike in the past where cryptocurrencies were often seen as tools for illicit activities, key legislators now have a more neutral stance towards cryptocurrencies. Industry insiders view this hearing as positive and constructive, laying a solid foundation for future crypto regulation.

Given that the President's Working Group on Financial Markets recently released a stablecoin report, Congressman Sean Casten suggested holding a separate hearing specifically on stablecoins.

Congressman Warren Davidson stated that stablecoins are the easiest part of the crypto space to regulate, as they are most similar to the traditional banking system. Congresswoman Nydia Velázquez requested that stablecoin issuers like Circle and Paxos must fully back all stablecoins with cash and U.S. Treasury bonds, even in the absence of federal standards.

Regulatory Consistency

Coinbase CFO Alesia Haas emphasized the importance of regulatory consistency, noting that the SEC has yet to provide clarity on its prohibition of Coinbase Lend's lending products.

Brian Brooks, CEO of Bitfury, raised the question:

If banks are allowed to issue stablecoins but the largest stablecoin issuers are not granted bank charters, is this stance consistent?

Brooks pointed out that minimum deposit requirements and account maintenance fees at banks are reasons why some individuals are underbanked, while stablecoins do not have such rules. He suggested applying a similar mechanism in the crypto space as the clear division of regulatory responsibilities in the U.S. financial system, rather than having a single regulatory body oversee the entire industry.

The hearing did not lead to specific developments, as lawmakers are still exploring and seeking to understand the crypto space through questioning, while industry experts are trying to explain the advantages of crypto over traditional finance. This resembles the situation when Libra faced congressional inquiries initially, but with less negative sentiment. The community views this as a successful battle, as summarized below.

Community Feedback

Jake Chervinsky, Policy Lead at the Blockchain Association and former legal counsel for Compound

Today's hearing was the most positive, constructive, bipartisan crypto public event I've ever seen in Congress. It shows that the engagement of relevant institutions and communities with legislators in Washington, D.C., over the past few months has been effective, and we have made astonishing progress.

Jeremy Allaire, CEO of Circle

I am very grateful for Congress' engagement in the crypto space. The five-plus hours of hearings made me feel that crypto, stablecoins, and the market are non-partisan issues. Legislators raised many thought-provoking questions, and I have never been so inspired. They are considering and seeking to address many key issues without rushing to judgment.

Tomicah Tillemann, Global Head of Policy at Andreessen Horowitz

This is an inspiring start. Members of Congress are recognizing for the first time that web3 is the future, with the potential to address issues like remittances, financial inclusion, and fixing flaws in web2. Everyone's insights are constructive, and I am very grateful.

Sam Bankman-Fried, Founder of FTX

Thank you to the House for discussing the future of digital assets with us. I expected to face hostile and sensationalized questions, but the topics discussed turned out to be productive. I am pleased to continue working with legislators to improve the regulatory landscape.

Sam Trabucco, CEO of Alameda

In 2018, Congress held a crypto hearing where the starting point was essentially "this is a scam" or "I aim to ban it," but this time is different. Almost all committee members are wavering between hesitation, curiosity, and an open mindset, and are not averse to making cryptocurrencies part of the U.S. Nearly all members are hesitating, curious, or open-minded about the topic, and not dismissive of making cryptocurrencies part of America. The recent adoption of cryptocurrencies by many institutions and the mainstream, along with Congress following a similar adoption trajectory, is exhilarating. While this is just an initial hearing and there are many uncertainties, the committee's open attitude towards technological innovation leaves me optimistic about the future of regulation after the hearing ends.