The U.S. Senate Banking Committee put crypto on trial Tuesday as Sen. Elizabeth Warren (D-Mass.) said the industry needs tighter regulation and as the committee’s chairman sought to answer his own hearing’s titular question – “Cryptocurrencies: What are they good for?” – with a resounding “nothing.”
Warren said bitcoin decentralization is a fantastical narrative because the network’s true power brokers – miners and corporations – have the leverage to achieve false moral supremacy over big banks.
“Instead of leaving our financial system at the whims of giant banks, crypto puts the system at the whims of some shadowy faceless group of super coders and miners, which doesn’t sound better to me,” Warren said.
Painting the industry as a fraud-ridden, accountability-dodging, digital slot machine that enriches its creators and burns everyone else, Sen. Sherrod Brown (D-Ohio), the banking committee’s chairman, warned in his opening remarks that crypto could endanger U.S. consumers and financial stability.
“There’s nothing democratic or transparent about a shady diffuse network of online funny money,” Brown said. He called for “smart regulations” that protect consumers from crypto “extortionists” and their “phony populist marketing.”
The hearing was almost certainly the testiest in a trio of crypto-themed inquiries Tuesday morning.
Elsewhere on Capitol Hill, House members debated central bank digital currencies (CBDCs) and senators jousted on the ransomware wave. It was a sign of the growing influence that crypto wields in monetary policy and cybercrime.
Democrats on the banking committee said that influence should be quashed, as they attacked crypto for myriad hypocrisies – particularly decentralization. Republicans, led by ranking member Sen. Pat Toomey (R-Pa.), who has invested in cryptocurrencies, were slightly more cautious; Toomey acknowledged “legitimate concerns about cryptocurrency” but showcased the upsides of blockchain technology.
Three very different witnesses – Angela Walch, a professor at St. Mary’s School of Law in San Antonio; Jerry Brito, executive director of Coin Center, a blockchain and digital currency advocacy group; and Marta Belcher, chairwoman of the Filecoin Foundation – offered sometimes irreconcilable viewpoints on the industry.
Walch described crypto as an unregulated time bomb primed to wreak havoc on traditional financial payment systems, and Belcher called out the “myth” that cryptocurrency isn’t heavily regulated.
Lawmakers weigh in
Some senators used the hearing to push different theories about market and mining trends. According to Sen. Jon Tester (D-Mont.), China’s bitcoin mining exodus is step one in a state-sanctioned plan to achieve dominance in the financial industry over the U.S.
“They’re shipping ‘em around the world because they know these guys can raise hell with our financial system,” he said.
Sen. Tina Smith (D-Minn.) said that most decentralized finance (DeFi) derivatives instruments violate U.S. commodities law, a view echoed by Dan Berkovitz, commissioner of the Commodity Futures Trading Commission. Smith later called out bitcoin’s massive carbon footprint, poo-pooing arguments that crypto can go green.
“We don’t have time to ride the cost curve down,” she said.