CEOs testify on Bitcoin to U.S. lawmakers

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CEOs of major cryptocurrency firms appeared before Congress on Wednesday to testify and answer questions about their products and services and the Bitcoin market in general as lawmakers struggle to bring the market into public policy and executives. regulatory.

“Several questions remain as to how traditional rules are applied and whether regulators have sufficient authority to protect investors and consumers while maintaining market integrity and encouraging innovation,” said the representative. Maxine Waters, Democrat of California, in her opening statement.

Waters led the House Financial Services Committee in Audience Navigation, which has been called upon to improve the understanding of Bitcoin and cryptocurrency regulators and how the market fits into existing legislation. She also shared her concerns about mining energy use, comparing it to the benefits of Bitcoin that the committee is exploring, including remittances and instant value settlement.

“The subject is important to anyone who cares about US competitiveness in the financial services industry; a financial ecosystem that empowers users to banks, CEOs and other powerful central decision-makers, ”said Brian Brooks, CEO of Bitfury and former Acting Controller of the Office of the Comptroller of the Currency (OCC) Brian Brooks .

While Bitcoin aims to give power back to individuals instead of further enriching large corporations, centralized custodians pose a threat to this value proposition, as they deny the user the ability to hold the keys to spend their funds.

Coinbase Global CFO and CEO of U.S. subsidiary Coinbase Inc., Alesia Haas, said the exchange currently secures around 12% of the world’s cryptocurrency, explaining how Coinbase uses “extensive controls to protect assets from clients”.

While high-level security is a must-have feature of bitcoin exchanges, having a centralized entity controls a significant portion of the total bitcoin and cryptocurrency coins in the world is problematic.

The fact that clients are leveraging large centralized technology companies to hold their funds represents a step back to the traditional financial system model rather than one that “empowers users over banks,” as Brooks has mentioned. Bitcoin can only achieve this goal of decentralizing power and allowing individuals financial freedom if they hold their own keys.

Brooks touched on the sovereignty afforded by the self-guard, pointing out how critical he is to one aspect of Bitcoin. However, the topic did not receive enough attention during the hearing. The Bitfury CEO also shared his thoughts on the dollar as a global reserve currency when asked if Bitcoin could pose a threat to the status of the U.S. fiat currency, which worries the House.

“Going forward, with the rise of China and other major economies, the US dollar cannot take its primacy for granted,” Brooks said, adding that he supported the idea of ​​a dollar. American digital. “We have to start thinking about competition on utility, on functionality, not just on the basis of a post-WWII monetary system that we might take for granted for the past two generations.”

Brooks also said that the Federal Reserve’s lax monetary policies since the 2008 financial crisis, which recently caused inflation rates to rise sharply in the United States, undermine the dollar’s attractiveness against other currencies. The executive explained that he sees Bitcoin and cryptocurrency as a way to encourage the Fed to stop quantitative easing policies through market competition, ultimately allowing the dollar to remain the currency. dominant reserve, a place that Brooks considers the “right” one.

The idea that Bitcoin is a competitor in the US financial system is shared by at least one prominent figure in the US regulator. Securities and Exchange Commission (SEC) Chairman Gary Gensler spoke on the subject last week, saying Bitcoin was created “as a reaction, an off-grid type approach” to the US banking system – competition that he does not support. .

Even though most of those in the House hearing treated “cryptocurrency” or “digital assets” as an asset class that encompasses Bitcoin, there are some key differences between the decentralized monetary network alone and the thousands of tokens and projects of this asset class.

Bitcoin is the only form of money that does not depend on the favorable prospects of the House of Representatives to function, nor on a regulatory framework to empower millions of people around the world. Cryptocurrencies, however, do not enjoy the same anti-fragility properties, and their functionality is subject to the approval or disapproval of government regulators.

Gensler seems to understand this, as the watchdog leader drew a line between Bitcoin and digital assets last week.

“Innovations around DeFi could be real, but they will not persist if they stay outside of public policy frameworks,” he said.

As Gensler and most lawmakers call for tighter regulatory oversight of Bitcoin and cryptocurrencies, arguments were raised during the hearing that the tactic could backfire.

“We don’t need knee-jerk reactions from lawmakers to regulate out of fear of the unknown rather than seeking to understand,” said Representative Patrick McHenry of North Carolina. “This fear of the unknown and the willingness to regulate before understanding will only stifle American ingenuity and put us at a competitive disadvantage.”

The SEC itself has pushed some of the new developments in the Bitcoin market north over the past year, as the commission refuses to approve a spot BTC exchange-traded fund (ETF) in leniency from the authorities. Financial services from the United States of Canada on the issue of financial services led the giant Fidelity Investments to launch its “physically” backed offering in the neighboring country earlier this month.

Fidelity had filed a spot bitcoin ETF with the SEC in March, but with no prospect of short- or medium-term approval, the institution resorted to the Toronto Stock Exchange. After the move, Fidelity became the largest company to offer a bitcoin ETF. The SEC still has many similar files on its desk awaiting approval.

Part of the battle lies in the SEC’s requirements to activate such a product in the United States, which executives say does not correspond to Bitcoin. They suggested lawmakers consider drafting specific legislation for the industry, which they said would ensure U.S. competitiveness in the world and foster innovation in the country, instead of pushing new developments to others. country.

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