Executives of six leading cryptocurrency companies, appearing before the House Financial Services Committee on Wednesday, advocated for light regulation as Washington policymakers consider how to impose federal oversight on the booming industry.
The explosive growth of cryptocurrencies has “contributed to working families looking for alternatives to rebuild their nest egg by investing in cryptocurrency,” said Rep. Maxine Waters (D-Calif.), the committee’s chairwoman. Yet the industry has “no overarching or centralized regulatory framework, leaving investments in the digital-assets space vulnerable to fraud, manipulation and abuse,” she said.
The total global value of the market has rocketed fourfold in the past 12 months, from $573 billion this time last year to nearly $2.4 trillion today, according to CoinMarketCap.
Rep. Patrick T. McHenry of North Carolina, the top Republican on the panel, said the technology “is already regulated. … Of course, we need reasonable rules of the road, but the knee-jerk reaction of lawmakers to regulate out of fear of the unknown will only stifle American ingenuity and put us at a competitive disadvantage.”
The assembled executives agreed.
“I think that it is coming, and I think that it is important, and I think that it is healthy that the industry will be regulated,” said Samuel Bankman-Fried, chief executive of FTX, one of the world’s largest crypto exchanges. “I think that it is also already regulated in a number of ways. … And it is important to do so in a reasonable, common-sense way that understands the industry.”
The executives represented different corners of the emerging crypto economy. They included Bankman-Fried and Alesia Haas, Coinbase Global’s chief financial officer, whose companies provide platforms to buy and sell digital assets, as well as Circle CEO Jeremy Allaire and Paxos CEO Charles Cascarilla, whose companies issue stablecoins, a type of cryptocurrency whose price is linked to the dollar. Brian Brooks — the former acting U.S. comptroller of the currency, now CEO of bitcoin-mining company Bitfury — and Stellar Development Foundation CEO Denelle Dixon rounded out the group.
The industry chiefs sought to use the hearing to reframe crypto’s potential. Rather than just the risky investment opportunity many policymakers have understood it to be, they said, the technology is undergirding a new wave of applications that can transform financial services, from real estate to cross-border payments.
There was little apparent consensus among Democrats about their next legislative move. One option is crafting a law that hands federal bank overseers more explicit authority to regulate stablecoins, one of the fastest-growing digital currencies, with a total market value that reached $147 billion last month. A high-level group of financial regulators last month issued a report urging Congress to get involved. Their concern is that without stronger requirements for the quality of the assets backing up the tokens, a misstep could prompt a sort of bank run that destabilizes the wider financial system.
The Senate Banking Committee is set to take a closer look at stablecoins in a hearing next week.