Congress Can Take the Right Approach on Cryptocurrencies
By Thomas Hodge
150 years ago, the big banks of today like Bank of America and JPMorgan Chase rose to prominence thanks to the work of Congress and the passage of the National Bank Act. 50 years ago the first “internet” network was established under a government-funded project, setting in motion the internet revolution and one of the nation’s largest economic drivers. These American innovations dreamt up in the halls of Congress and government laboratories had one thing in common: a clear and transparent role for the federal government.
Today, a new industry built on blockchain and cryptocurrency technologies is transforming our concept of business, the internet, and personal finance. However, unlike the internet and banking, the role of the federal government in the cryptocurrency space remains unclear and the industry and American economy are suffering as a result.
Recently, cryptocurrencies entered the mainstream when Facebook announced it would be expanding into the space. Facebook’s launch of Calibra and its digital currency Libra finally caught the attention of policymakers in Washington. Some have been asking, will the company’s two billion daily active users draw business away from traditional banks? Will Congress overstep to avoid another Cambridge Analytica, killing off a burgeoning industry?
While these concerns expressed from industry leaders and lawmakers may be warranted, Facebook’s announcement is a distraction from the larger issue at hand. Congress needs to get to work and design a regulatory framework for the future of cryptocurrencies.
Instead of creating a safe harbor to encourage growth and increase American innovations in the space, the absence of regulation is chilling the industry. Many cryptocurrency businesses fear what tomorrow could bring, spending millions of dollars seeking clarity from the Securities and Exchange Commission (SEC) or worse, leaving the U.S. for a more welcoming nation.
The overreaction to Facebook is causing lawmakers to respond to the cryptocurrency space with sweeping generalizations, bypassing the nuanced conversation we need to be having about the future of the industry.
Following two somewhat overheated Congressional hearings examining Calibra, the Senate Banking Committee held a hearing to examine the cryptocurrency industry more broadly to ask how it should be regulated. Before the hearing, one of the better known crypto industry players, Ripple, penned a letter to Congress with a simple request: “Please do not paint us with a broad brush.”
As they pointed out, not everyone is Facebook, there are dozens of cryptocurrency businesses and FinTech apps that came long before Calibra who are already collaborating with law enforcement and regulatory agencies on compliance and consumer protections. Of course, their innovations will disrupt the status quo, but that’s no excuse to try and bury these promising technologies before consumers have a chance to benefit from their full potential.
As we saw with the growth of the internet, the federal government should use its resources to encourage cryptocurrency growth, not hamper innovation. Congressional hearings, no matter how sensational they may be, are a step in the right direction. Cryptocurrencies require oversight and direction from Congress, but first, deserve comprehensive analysis and the opportunity for stakeholders to engage with lawmakers in the design and implementation of a new regulatory framework that fits the industry.