In its second hearing regarding digital assets and distributed ledger in as many weeks, the US Senate Committee on Banking, Housing, and Urban Affairs appeared more sedate but just as concerned about the disruptive technologies.
The hearing’s attendance was slightly less than half of the previous hearing with only seven senators peppering Jeremy Allaire, co-founder, chairman and CEO of Circle and who testified on behalf of the Blockchain Association, Rebecca Nelson, a specialist in international trade and finance at the Congressional Research Service, and Mehrsa Baradaran, professor of Law at the University of California’s Irvine School of Law, with questions.
Committee Chair Sen. Michael Crapo (ID-R) began the question period by asking Allaire how the US could create a comprehensive approach to the more than 2,300 digital currencies while acknowledging the unique characteristics of each one.
Allaire noted that many of the commodity monies would need to be regulated as the US regulates other commodity monies with various financial crime controls put forward by FinCEN.
However, he also noted that the US should avoid jamming digital assets into the existing regulatory categories since digital assets could blur the lines between what is a currency, commodity, and an investment contract.
“There is a fundamental mismatch between the regulatory structure and guidance that we have here and the nature of these digital assets,” he said. “Markets around the world are adopting these, not just Bermuda, but Singapore, Switzerland. Jurisdictions like France have introduced tailored-purposed definitions of digital assets so that issuers can feel comfortable with their obligations. There are investor protections associated with those and security and the like.”
The conversation took a quick philosophical turn as Ranking Member Sen. Sherrod Brown (OH-D) began questioning the motives of digital currency issuers seeking to provide banking services to the under- and unbanked.
Many of the results that digital currencies could eliminate banking deserts within the US, but it would require mass adoption while the government and its regulators could achieve the same results sooner through changing existing policies, testified Baradaran.
The US payments infrastructure could improve its performance if the Federal Reserve opened up the existing infrastructure to non-banks, she cited as one example.
Baradaran and Allaire also cautioned the Committee that some digital currencies seek to re-litigate whether adopting fiat currencies was a wise move by having specific monetary policies baked into them.
“Our Federal Reserve has the charter to create elastic currency,” said Baradaran. “It is a debate that we have litigated in Congress. If we want to re-litigate the merits of gold versus fiat, Congress would be the place to do it not at some startup.”