Cryptocurrency Chiefs Go to Congress for Landmark Hearing
The chief executives of six cryptocurrency companies are facing questions from the House Financial Services Committee about risk and regulation.,
Congress gets a crash course on cryptocurrency.
By Ephrat Livni
- Dec. 8, 2021, 7:15 a.m. ET
The chief executives of six cryptocurrency companies are testifying on Wednesday before the House Financial Services Committee about the promises, perils and uses of stablecoins, or cryptocurrencies that are pegged to the value of stable assets such as the dollar.
They include Brian Brooks, the former acting comptroller of the currency under President Donald J. Trump and now the chief executive of the blockchain technology company Bitfury Group; Sam Bankman-Fried, the chief of the crypto exchange FTX; Alesia Haas, the chief of Coinbase’s exchange in the United States; and Jeremy Allaire, the chief of the payments company Circle.
Key to transactions in volatile crypto markets, the market capitalization of stablecoins reached almost $147 billion as of November, a more than 500 percent increase over the previous 12 months, according to the committee’s hearing memo. But they have so far proved not to be backed as stably as some issuers have claimed, raising concerns about a digital bank run that could threaten the wider economy, given current growth rates. Financial regulators last month asked Congress to “act promptly to enact legislation” that addresses these risks.
The hearing called by Representative Maxine Waters of California, the committee’s Democratic chairwoman, is part of a crypto “fact-finding mission” that will help members determine what steps to take next on stablecoins and other cryptocurrency issues, a committee aide said. He declined to provide a timeline for potential legislative action, but acknowledged the possibility it could be imminent, given the concern and urgency expressed by financial regulators.
Some of the executives who are testifying are trying to convince the committee that it is focused on the wrong questions and should be thinking about the bigger picture.
Mr. Brooks said in an interview on Tuesday that American policymakers were too preoccupied with small issues, like whether stablecoin issuers should be granted banking charters and which crypto tokens might be securities, and insufficiently concerned with global primacy and offering investors safe access to the products they want. The co-founder and chief executive of the stablecoin issuer Paxos, Charles Cascarilla, said he looked forward to discussing with policymakers how crypto could make financial services, like settlement times for trades, more efficient and banking more inclusive.
Crypto proponents often argue that blockchain technology allows people to bypass traditional intermediaries and move value around the internet without gatekeepers like banks. That could help bring the 1.7 billion people globally who are excluded from the existing financial system into a new one, they say.
Denelle Dixon, the chief executive of the blockchain payments network Stellar, will make the case that stablecoins were already being used creatively beyond trading and speculation, for example to ease alternative banking services for refugees in Africa. “It’s incumbent upon industry to get folks comfortable with the technology,” she said before the hearing, adding that the event shows lawmakers were ready to engage.
Indeed, Senator Sherrod Brown of Ohio, the Democratic chairman of the Senate Banking Committee, called a hearing on stablecoins for next week. The witness list has not been finalized.
Mr. Brown, a vocal crypto critic, said that he was reviewing responses to a letter he sent major stablecoin issuers and investors that asked about their operations and relationships, citing risks raised by financial regulators. The inquiry was sent to the crypto exchanges Coinbase, Gemini and Binance.US, the stablecoin issuers Circle, Tether, Paxos and Trust Token, and to the stablecoin consortium Centre, which oversees the joint Circle and Coinbase venture.
Mr. Brown said his hearing would be a “step” toward legislation and that he was “working together” with financial regulators, like the Securities and Exchange Commission chairman, Gary Gensler, and Treasury Secretary Janet L. Yellen.
But the senator does not expect the executives at the Wednesday hearing or any other to say much about blockchain or financial inclusion that he has not heard before. Recalling the “financial wizards” who promoted mortgage-backed securities and derivatives ahead of the 2008 financial crisis, he asked, “When are we going to learn?”
Mr. Brown added, “I want responsible innovation, and that means rules.”