Close-up of Congress of Crypto Experts is coming

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If you look at the six crypto luminaries scheduled to testify before the House Financial Services Committee next week, an agenda becomes clear.

Clear regulation integrating cryptocurrencies, stablecoins, and decentralized finance (DeFi) into the financial system is coming, and it could be a good thing. The “how” to get it right will be on the agenda more than the “if” for it to happen.

The December 8 hearing is titled Digital Assets and the Future of Finance: Understanding the Challenges and Benefits of Financial Innovation in the United States.

It will focus on how the government should support innovations in the crypto-economy while creating a regulatory structure that will protect its users.

The witnesses are:

Jeremy Allaire, CEO, Circle Sam Bankman-Fried, CEO, FTX Brian Brooks, CEO, Bitfury Chad Cascarilla, CEO, Paxos Denelle Dixon, CEO, Stellar Development Foundation Alesia Haas, CEO, Coinbase Inc., and CFO, Coinbase Global Inc .

Why Them?

Committee chair, Representative Maxine Waters of California, is seeking support for legislation to regulate stablecoins and other digital assets. Support for this is far from universal. The Digital Chamber of Commerce challenged it in an Oct. 19 letter to members of the President’s Financial Markets Task Force – a group that includes Allaire.

See more: The Big Crypto Debate: It’s Different This Time, Or Maybe Not

Arguing that stablecoins do not threaten the financial system, the chamber said it “believes that current federal and state regulatory regimes should remain in place,” allowing stablecoin payment systems “to be regulated from the outset. same way that other US digital payment platforms are regulated. “

Last month, QED Investors Partner and former Deputy Treasury Secretary Amias Gerety told Karen Webster of PYMNTS: “Just because you’re using new or innovative technology in a certain way doesn’t mean you need to. new regulations… a skeptical place when we pretend something is new or different.

Read more: Regulating Crypto: Is It Different Or Is It The Same?

Now analyze the list of speakers a bit, and Hass’ Coinbase is a public company and Allaire’s Circle is a company that will soon be public. They are jointly behind the No. 2 stablecoin USD Coin (USDC). Paxos de Cascarilla issues the smallest – just under $ 1 billion – the Pax Dollar (USDP).

Overall, they have advocated for the introduction of crypto into the financial system and they want the blessing of lawmakers and regulators.

FTX’s Bankman-Fried has called over-regulation a huge threat that can only be overcome by industry striving to build confidence. He is also in favor of “well done” regulation, saying “it is a long time coming, and it is absolutely necessary”. (Additionally, he donated $ 5 million to President Joe Biden’s campaign, making him one of Biden’s biggest donors).

Then you have Brooks, the former Acting Comptroller of the Currency – a position he used to allow banks to make stablecoin payments, a decision whose importance, Allaire said, could not be overstated. It was an important step in the introduction of crypto into the banking system, and a step that requires a strong regulatory framework.

Stellar’s Dixon focuses on local and international payments, including remittances, fast and inexpensive. She called the regulation “necessary” for this to happen.

Read more: Blockchain Rails Plus Stablecoin Advance DeFi Reality

Go back

Throughout the year, PYMNTS spoke to Allaire several times. Here’s a summary of the regulatory thoughts he shared.

See also: New regulations could push US dollar stablecoins into the mainstream of payments

In September, when USDC had a market cap of just $ 27 billion, up from $ 39 billion today, Allaire told Webster that regulatory review was both appropriate and desirable. When something gets as big as crypto, he said, “naturally – whether you’re the Federal Reserve or the US Treasury Department or other federal level agencies – the question … is whether it will ultimately be something that will be supervised like other banking activities. “

Read more: With $ 27 billion in market value, Circle CEO says USDC Stablecoin is too big to ignore

In mid-June, Allaire added that crypto was approaching a tipping point that will correspond to societal changes linked to the broadband revolution that has resulted in a connected economy.

“There are key pieces of infrastructure that need to be put in place to light this kind of thing in the world,” he said, that are needed for this crypto economy to have its “broadband moment”. .

See More: Crypto Economy Gears Up For Its High Speed ​​Moment

And, he added, this will require innovation that can only come from the private sector. Highlighting the changes in payments ranging from credit and debit cards to PayPal and Apple Pay, he said, “They are not coming from the federal government. They came from private sector actors. And it probably won’t be any different in the age of internet money.

But this technological revolution must be – and is – accompanied by a regulatory infrastructure.

“Political structures are taking shape all over the world that recognize this as legitimate and fundamental infrastructure,” he said. However, “exam manuals do not exist for these new technologies” at the moment.

These two infrastructure changes are driving innovations like stablecoins and non-fungible tokens (NFTs), Allaire told Webster.

“You are seeing the birth of interest rate markets where people can borrow and lend through a machine on the Internet,” he said. “And it’s really dramatic… it opens up access to financial services, potentially, to a lot more people than ever before.”

Speaking of stablecoins at the end of June, he added, “It is widely recognized that stablecoins running on public blockchain infrastructure are here to stay.”

Read more: Cryptocurrencies are not a zero-sum game

Building a regulatory framework that allows them to be compliant without sacrificing innovation requires recognizing that it must leave the responsibility of governments for what they really care about: firm control over money supply and monetary policy.

It means charters, licenses and being clear that crypto cares “about safety and soundness,” he said. “You want a well-supervised, well-managed system with preservation of capital and liquidity. “

For all of this to happen, at least some of the middlemen that blockchain technology was supposed to eliminate will still be needed – especially in DeFi – as regulators will demand it, he warned. But, he told Webster in March, that will require intermediate innovation, building a regulator-friendly structure on top of the emerging new payments and financial services model.

See more: Decentralized Finance Drives Birth of New Internet Credit Markets

“The role of intermediaries will be essential,” he said. “In particular, as [DeFi] becomes more mature as an infrastructure for financial market activity and payment business, regulators will want companies that are intermediaries to cover consumer protection and financial crime monitoring. “

Brooks’ letter when he headed the Office of the Comptroller of the Currency was a resounding success that “speaks to the need for banks and other financial institutions to try to participate in the standards” that govern the creation, issuance and the use of stable coins, Allaire said. earlier in the year.

What questions will they face?

What is the right balance between regulation and innovation?

This Democratic versus Republican fight was previewed during last week’s hearing before the Senate Finance Committee, when Donald Trump-appointed Federal Reserve Chairman Jerome Powell grappled with the Secretary of the Treasury selected by Biden, Janet Yellen.

How to ensure that the promise of a new crypto economy is shared by all?

Given the priorities of the committee chair, Waters, it will be critical to ensure that people of all races, classes and income levels share in the benefits of the FinTech revolution.

How do we make sure consumers are protected and bad actors are outsmarted?

Everyone agrees on the need for anti-money laundering (AML) regulation, even in DeFi. But getting there without stifling innovation will be a sticking point.

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NEW PYMNTS DATA: 2021 HOLIDAY SHOPPING PERSPECTIVES

By the way: It’s almost time for the holiday shopping season, and nearly 90% of U.S. consumers plan to do at least some of their purchases online – 13% more than in 2020. On the 2021 Holiday Shopping Outlook, PYMNTS surveyed over 3,600 consumers. to find out what drives online sales this holiday season and the impact of product availability and personalized rewards on merchant preferences.

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