Witnesses will be:
• Lee Reiners (policy director at the Duke Financial Economics Center, crypto skeptic)
• Linda Jeng (crypto lobbyist)
• Yesha Yadav (law prof at Vanderbilt, pro-crypto, big on crypto self-regulation)
Sen. Brown (D-OH) apologizes for delay, says they were held up at a briefing about spy balloons. 🎈 Starts out with a fairly scathing remarks, as to be expected from historically skeptical Sen. Brown.
Sen. Scott (R-SC) starts out by requesting that SEC Chair Gary Gensler be called to testify in front of the committee. Begins a testimony that speaks about how innovation needs protecting, blames SEC for FTX collapse, Terra/Luna, Celsius, Voyager, BlockFi, etc.
Lee Reiners begins by refuting the claims that "it's still early", and speaks of the "dire harm that cryptocurrency inflicts throughout our society".
Points to losses through hacks and scams, national security threats, ransomware impact on infrastructure, and climate impact. "What benefits do we have to show for these costs?"
Reiners urges Congress to recognize cryptocurrencies as security and give SEC full jurisdiction over the crypto industry. Argues that SEC has more resources, and critically, has a consumer protection mandate.
On to Linda Jeng. "Technological innovation enhances people's lives in meaningful ways", says Jeng, shortly after Reiners said that we need to realize that "technological innovation" is not inherently a good thing.
Jeng urges Congress to "establish a federal regulatory framework for digital assets, addressing securities and non-securities". Argues that there's a risk that strong regulation could push crypto companies offshore and weaken US financial dominance.
Yesha Yadav is up now. Yadav says that the crypto collapse in 2022 should be taken as an indictment of the failed crypto companies but also of regulators.
Begins her argument for a "self-regulatory regime", where crypto companies should be the ones to oversee the space.
She specifically calls out serious flaws in her proposed plan, which she acknowledges exist in self-regulation in traditional finance also, but says that it's needed to get the industry up and running quickly.
Reiners says that the crypto industry's criticism of "regulation by enforcement" by the SEC is simply a deflection from the industry's repeated and widespread choice to operate in contradiction to SEC regulations.
Sen. Scott (R-SC) is up now. Continues to denigrate US regulators for "muddying the waters", repeats that he wants to get SEC Chair Gensler in front of congress before his scheduled hearing in September.
Sen. Scott: "Let's be clear: had the SEC provided anything besides hostility to the crypto industry, we may have been able to save investors from losing billions of dollars on FTX, Celsius, BlockFi, and the list goes on."
Reiners says he agrees with Gensler that most cryptos are securities, but that some (like Bitcoin) are "sufficiently decentralized" to the point that they're more like commodities, which splinters the regulatory environment.
He argues that to address that, Congress should carve out cryptos to be placed under SEC jurisdiction to provide a unified regulator.
Hoo boy, Sen. Vance (R-OH) — crypto booster and holder — is up now. He says he owns crypto, then goes on to say "we don't really know what [crypto] is yet".
Yadav cites two examples of "innovation for as long as we can remember in this economy": ATMs and "all of the financial engineering that we saw pre-crisis".
Sen. Van Hollen (D-MD) asks about thoughts on Professor Hilary Allen's testimony in a previous hearing, where she urged for a sort of "Glass–Steagall 2.0" for crypto.
Reiners calls for transparency from banks to customers as to their crypto exposure.
Reiners cites the recent Silvergate crypto bank run, a bank that likely only survived because of emergency liquidity from the Federal Home Loan Bank of San Francisco. "[This] of course is not the reason we have federal home loan banks. They exist to support home ownership, not to bail out banks that gamble on crypto".
Sen. Britt (R-AL) and Jeng are arguing that crypto will allow "more people in the US to achieve the American dream", they pull out stats on adoption of crypto by people of color, women.
Reiners: "There is no evidence whatsoever to suggest that crypto promotes financial inclusion. In fact, there is overwhelming evidence to suggest the exact opposite is happening. Most people who've invested in cryptocurrency have lost money. Of those people, a plurality are minorities and low-income Americans. This is an example of predatory inclusion..." 1/2
"... We saw the same thing with subprime loans leading up to the 2008 financial crisis, where low-income and minority communities are being explicitly targeted with very, very risky products. And unfortunately they have lost, in many cases, everything." 2/2
Sen. Tillis (R-NC) tries to argue for proof-of-reserves, Reiners shuts him down by saying that POR "aren't worth the paper they're written on", and what we need are audits.
Sen. Warren (D-MA), as to be expected, starts out with a statement about crypto enabling crime, terrorism, ransomware, etc. focuses on the use of crypto for money laundering.
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