Crypto Experts: Regulators Need to Be Involved
WASHINGTON — As Congress contemplates sweeping oversight legislation to cryptocurrency, industry leaders are welcoming those potential guardrails.
It’s important to “strike the right balance of acting quickly in the United States to establish this clarity and also the appropriate guardrails we need for consumers and investors,” said Brett Quick, the North American head of government affairs for the Crypto Council for Innovation. “But that we do it really thoughtfully and responsibly to make sure we are not unduly stifling innovation.”
Quick was part of a panel of crypto experts hosted by the Bipartisan Policy Center Wednesday discussing the opportunities and challenges of the digital currency built on blockchain technology. The experts all agreed: Cryptocurrency companies, executives and other enthusiasts were overall happy with the proposed legislation and commitment from lawmakers globally to install some guardrails on the new digital financial assets.
“The biggest challenge [for innovators] is regulatory uncertainty,” said Joshua Gans, a professor specializing in technical entrepreneurship at the Rotman School of Management at the University of Toronto.
He equated cryptocurrencies to early days ride-share services like Uber and Lyft that operated outside of the typical taxi regulations.
He said there were fears that “there won’t be any built-in instruments to deal with that risk when it comes.”
He gave the example of Facebook when it attempted to develop its “Diem” stablecoin years ago and was working with regulators across the globe.
The company attempted to be as “good-faith as possible” within legal systems, but regulators instead told them the “doors are closed for you” because governments weren’t ready. Facebook then stopped its development of the cryptocurrency it poured millions into developing and alternatives have cropped up.
Some of those alternatives have been built on “shaky foundations,” but regulations will help weed those out, Quick said.
Despite having legislation stipulating oversight of the industry, the Department of Treasury and other agencies have been looking into how to regulate digital assets, explained Julia Smearman, the director of International Markets at the Department of Treasury. The Treasury and other government agencies are working with the White House operating under an executive order President Joe Biden signed earlier this year.
“The goal of the executive order is to support responsible innovation while also taking steps to reduce the associated risks,” Smearman said.
The Treasury’s top priorities stemming from that executive order are to ramp up international engagement on cryptocurrency regulation and implement high regulatory standards at home, she said.
That executive order was a “significant development” applauded by cryptocurrency businesses, Quick said, because it recognized the “crypto industry is here to stay.”
From that order, there will be a series of reports coming out in the next few months on crypto-related topics, including a centralized bank of digital currency.
The idea of a centralized bank for individual governments has gained popularity globally. It would create essentially “an account that you hold with the government,” Gans explained.
A central bank would make stimulus and other social programs like food stamps easier to access, he said.
“That part of the account could be spent just using a normal debit card,” Gans said. That would “improve inclusion and reduce stigma by making it look more normal for everyone.”
Crypto assets in general are more accessible to people, the experts agreed.
In the extreme, it’s an amazing tool to get aid quickly across international borders, like to Ukraine as Russia invaded the country earlier this year, Quick said.
“We saw that was more successful than other sorts of famous cases of foreign aid not being delivered efficiently, like in the case of Haiti,” she said.
Also, 60% of the time cryptocurrencies are used for transactions it is by people making less than $50,000 a year, Quick said, citing a 2021 report from the Federal Reserve. That same report found 13% of cryptocurrency customers also don’t have bank accounts.
They also touched on the environmental impacts of cryptocurrency mining — the blockchain transaction process to track cryptocurrencies that use immense computer power.
“Cryptocurrencies have this potential locked inside them to find the cheapest way of doing whatever they do and being able to switch directly to it, because it’s just a database,” Gans said, explaining that the computer processing plants powering these cryptocurrencies will adapt.
The policy experts at the center are expected to continue the conversations about cryptocurrency regulations with another bipartisan policy organization, Humanity Forward.
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