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Digital assets will take center stage in front of Congress on Wednesday.
The full House Financial Services Committee is set to meet this morning to discuss cryptocurrencies and stablecoins with Circle CEO Jeremy Allaire, FTX CEO Sam Bankman-Fried, Bitfury CEO Brian Brooks, Paxos CEO Charles Cascarilla, Stellar Development Foundation CEO Denelle Dixon and Coinbase Inc. CEO Alesia Haas (who is also chief financial officer of the Coinbase Global parent company).
A hearing memo briefly details both the current outstanding issues regulators are focusing on, such as stablecoins, as well as what the current market looks like. The memo’s authors focus much of their attention on questions of investor protection and market integrity.
“Cryptocurrency markets have no overarching and centralized regulatory framework, leaving investments in the digital assets space vulnerable to fraud, manipulation and abuse,” the memo says, but it also notes that many exchanges and stablecoin issuers have received state money transmitter licenses or trust charters, and Paxos in particular has a conditional trust charter through the Office of the Comptroller of the Currency, a federal bank regulator.
And unlike some of the past hearings held by the committee, today’s meeting will be a full committee hearing, giving each of the more than 50 members a chance to ask questions or clarify any concerns they have about the industry.
Starting with Chairwoman @RepMaxineWaters. She is a strong force against the banks and protecting consumers. Her staff has been very open to discussing these issues and learning more. While she may be critical, she has been interested in non-financial use cases like NFTs. pic.twitter.com/XYApa14O7Q
— Ron Hammond (@RonwHammond) December 7, 2021
The lawmakers aren’t expected to debate the merits of any specific legislative proposal to regulate crypto during this hearing, though Rep. Warren Davidson (R-Ohio) has already tweeted about his Token Taxonomy Act, which has been introduced several times but has not been voted on by the House.
However, various reports by regulatory groups and requests by specific regulators may be discussed, such as last month’s President’s Working Group on Financial Markets report on stablecoin regulation.
The Token Taxonomy Act has been begging for a hearing since 2018. Ask that @RepMaxineWaters and @PatrickMcHenry notice it for the 12/8/21 House Financial Services Commitment hearing on “Digital Assets and the Future of Finance”. #PassTTA
— Warren Davidson (@WarrenDavidson) December 5, 2021
The witness statements largely lay out the various crypto executives’ businesses, as well as provide some suggestions on how lawmakers can address regulatory shortfalls.
Circle’s Allaire homed in on the current lack of specific stablecoin regulations in his prepared remarks – a key area of concern for regulators.
“There is much work to do in defining the reserve, liquidity and capital requirements, and the risk management and operational resilience requirements for global-scale stablecoin issuers,” Allaire said in his opening remarks.
Brooks, the former acting comptroller who briefly helmed Binance.US before his BitFury role, said crypto activities are already occurring outside of the regulatory framework, but it makes sense for a legislative proposal to bring these activities under the supervision of federal regulators.
He pointed to stablecoin issuers as one example, asking if it was “consistent to take the position that only banks should be allowed to issue stablecoins, but then fail to grant bank charters to the largest issuers of stablecoins.”
The Senate Banking Committee will follow up with a hearing on stablecoins next Tuesday.