During today’s United State Senate Banking Committee hearing on the regulatory framework for cryptocurrencies and blockchain, Cointelegraph will be updating live with the most important developments.
The July 30 hearing, titled “Examining Regulatory Frameworks for Digital Currencies and Blockchain,” follows the previous hearings in mid-July that examined the regulatory hurdles surrounding Facebook’s Libra.
Circle CEO Jeremy Allaire will be a witness today in front of the Senate Committee on Banking, House, and Urban Affairs on behalf of The Blockchain Association, along with Rebecca M. Nelson, a specialist in international trade and finance, and Mehrsa Baradaran, a professor of law at University of California, Irvine School of Law.
For more detailed information on the witnesses, Cointelegraph has a dedicated analysis here.
11:25 a.m. EST
Crapo: I want the U.S. to stay at the forefront of this technology, which both has incredible potential and incredible risk.
11:22 a.m. EST
Nelson: Facebook has changed the debate about cryptocurrencies
11:15 a.m. EST
Barabadan sees similarities in the resistance of tech companies to regulation in the same way that big banks are resistant to regulation.
11:16 a.m. EST
Brown asks what lessons we can apply to tech companies after the 2008 financial crash, and Barabadan says that there is a fear that the U.S. will lose its tech edge if it doesn’t let these companies grow unfettered.
11:13 a.m. EST
Brown: “If there aren’t really new products, why would we need rules and regulations?”—Brown going off the idea that the ideas are the same for financial instruments, just new technology backing them.
11:10 a.m. EST
Crapo: how does Libra gain global acceptance if it’s facing every country’s different regulatory climate?
Allaire: some of these cryptocurrencies are just open source software that exists on the internet and runs everywhere the internet exists (“even interstellar”).
Allaire: “Digital money will move frictionlessly, everywhere in the world, at the speed of the internet, hopefully with a high level of security and data protection.”
11:08 a.m. EST
Allaire notes that there are larger opportunities for digital assets and blockchains outside of the United States. When looking for locations, Circle wants a high bar from a regulatory perspective, from a custody risk in particular, as well as clear definitions.
11:04 a.m. EST
U.S. Senator Jon Tester of Montana appears concerned about Libra being compromised the same way that a credit or debit card can be.
“Would it kill cryptocurrency in the laws that we are probably going to be passing […] if we stipulated that it had to be a 1:1?”
11:02 a.m. EST
Nelson brings up money laundering as a big concern for cryptocurrencies around the globe, but says that some licensing, reporting, and transparency requirements can help with these concerns.
11:01 a.m. EST
Nelson thinks that some crypto hubs are using regulation as a way to attract crypto to their borders, using clarity and certainty to bring people in to their jurisdictions.
10:58 a.m. EST
U.S. Senator Christopher J. Van Hollen of Maryland on real-time settlement: “Our failure to have moved forward with this technology […] is costing millions of Americans, billions of dollars every day.”
10:56 a.m. EST
Cortez Masto asked Baradaran why digital currencies cannot bank the unbanked. She responds that the problem is that these people live in “banking deserts.”
Baradaran: “How does any digital-based currency help when people are operating in cash?”
10:53 a.m. EST
U.S. Senator Catherine Marie Cortez Masto of Nevada believes in the potential of blockchain, and the importance of leading in this technology over China.
10:51 a.m. EST
Schatz: “I don’t doubt the potential for this tech, I just don’t think that it’s going to actually bank low-income communities, and I don’t think you’ve persuaded anybody here that it’s going to do so.”
10:49. a.m. EST
Schatz keeps bringing up the idea that not everyone has a smartphone, and so it’s hard to place bets on this technology to solve all of our problems and “leap over all existing ones.”
Allaire rebuts by saying that technological innovation can be slow, comparing now to the beginning of the internet, of the slow implementation of broadband.
10:48 a.m. EST
U.S. Senator Brian Schatz of Hawaii asks if we are anywhere close to democratizing the use of technological products, following up on the overall financial inequality topic.
Schatz: “What it sounds like to me is tech people wanting to wave a wand and skip a bunch of steps and avoid the tough political of doing things for people.”
10:42 a.m. EST
U.S. Senator Mark Warner of Virginia is asking about the literal meaning of the 1:1 backing of the Libra.
Allaire comments that while the first wave of these types of digital currencies were focused on establishing a global digital currency, the critical mainstream use cases for the financial services sector has needed the development of stable coins, with Libra as an example.
Allaire now brings up the Circle consortium’s USD Coin as another example.
Warner responds by asking: if there is a basket of currencies backing the Libra, doesn’t that create currency risk?
Warner: “If you have a 100% reserve, where is Libra going to make money on this?”
10:36 a.m. EST
Baradaran is now speaking about the ways that people have tried to bank the unbanked and how those past attempts have failed, aligning those past failures with some of the stated goals of cryptocurrencies.
Baradaran admits that while blockchain is “amazing,” the hearing is about digital assets and the blockchain, and what is really going on in these markets. She repeats that the problems of the unbanked are policy problems, not technological.
10:34 a.m. EST
Allaire notes that we should regulate digital assets, but that we need new definitions of them as an asset class.
10:31 a.m. EST
Allaire: “Regulations around the custody of assets is a really critical need.”
Crapo then brings up Poloniex moving to Bermuda, and Allaire says that there is a big problem for digital assets fitting into definitions in our current financial systems.
“Unfortunately, in the United States, the guidance that the SEC has given is extremely, let’s just say, narrow, in terms of what they deem to not be a security.”
10:29 a.m. EST
Professor Mehrst Baradaran: “There is yet to be an innovative technology that has eliminated the risks and frauds and crimes that regulation is meant to combat.”
Moving to the blockchain doesn’t protect from these risks, in Baradaran’s opinion.
10:23 a.m. EST
Professor Mehrst Baradaran believes it’s natural that people have embraced Bitcoin in the aftermath of the 2008 financial crisis.
However, she adds that the current problems in our economy are issues of policy, not of technology, so blockchain is not necessarily the answer. According to Baradaran, we already have a public ledger, it’s called the Federal Reserve.
10:22 a.m. EST:
Dr. Rebecca M. Nelson thinks Facebook could be a game changer for cryptocurrencies, but it has raised both regulatory and systemic concerns before it can be implemented.
10:18 a.m. EST:
Allaire thinks that current restrictive atmosphere has led companies to domicile overseas, rather than in the U.S, and that Congress should define digital assets as a new asset class.
Allaire: “We are in the process of moving our international facing services and products out of the United States.”
10:15 a.m. EST:
Jeremey Allaire speaks about his views on the troubles of our current financial system, including cybercriminals, hostile nations, and a lack of equal access.
Allaire: “There absolutely can be a better future ahead, one built on digital assets and blockchains.”
10 a.m. EST:
Senator Michael Crapo of Idaho: These technologies are inevitable, they could be beneficial, and the United States should lead in this sector.
Senator Sherrod Brown of Ohio: “Facebook has proved over and over […] that they can not be trusted. But they don’t care. They move fast, they break things. Minor things, like our political discourse and journalisms and relationships and privacy. Now they want to break our currency and payment systems, hiding behind the phrase ‘innovation.”’