Key Points of Encryption Hearing | The Industry Called for No Excessive Regulation, and Members of Congress Proposed to Ensure Web 3.0 Revolution Took Place in the United States

【TL; DR】
1. On December 8, the Financial Services Committee of the U.S. House of Representatives held a hearing on the encryption industry, which convened executives of six large encryption asset-related companies for discussion.
2. The hearing focused on industry regulation, stable currency and Web3.0, and other issues, industry executives said frankly that the current regulation is not applicable to the encryption industry, and new regulatory laws need to be formulated for it; Some members of congress proposed to "ensure that the Web 3.0 revolution takes place in the United States".
3. There was no decision to solve the current problems of the encryption industry at the hearing, but the atmosphere of the meeting was positive. Members of Congress reduced their hostility to the encryption industry and tried to understand the encryption industry better through the meeting.
4. The media called this hearing "the most friendly hearing to the encryption industry in history", and practitioners in the encryption industry are optimistic about encryption regulation in the future.

The House Financial Services Committee held a hearing on the theme "The Future of Digital Assets and Finance: Understanding the Challenges and Benefits of U.S. Financial Innovation" at 10 a.m. EDT on December 8. The hearing convened crypto assets service providers such as stablecoin issuers, mining institutions, and cryptocurrency exchanges. Although some institutions did not send representatives (such as Tether), the hearing has been a constructive and positive dialogue for both sides.


Representatives of institutions Advised Against Over Regulation

Representatives of participating institutions said that the rapid growth of this industry reflects the strong demand of investors for digital assets, and clear supervision is conducive to the expansion of this industry, but the current U.S. financial regulatory structure is not suitable for the field of cryptocurrency. Legislators should re-formulate a set of regulatory laws for the cryptocurrency industry, rather than forcing the industry to comply with existing regulations.

Alesia Haas, the chief financial officer of Coinbase, said in her testimony: "considering that the industry has just started, digital assets and traditional assets are actually traded in different markets due to the unique underlying technology of cryptocurrency. Therefore, the existing regulatory system does not adapt to this technology."

Sam Bankman-Fried, the founder of FTX, suggested that Congress could pass legislation to grant the main regulatory power of the encryption industry to a single federal regulatory agency. Meanwhile, Sam Bankman-Fried also welcomed the stricter regulation of the spot market of bitcoin or cryptocurrency.

Brian P. Brooks, executive director of Bitfury, a mining organization, added: "presently, some companies involved in digital currency have found a more friendly environment outside the United States. For example, Fidelity, one of the most famous investment consultants in the United States, launched spot bitcoin ETFs in Canada." “there is a reason why talents in the encryption industry are no longer concentrated in Silicon Valley. "

Regulation of Stablecoins and Exchange is Mainly Discussed

Because of a stablecoin report released by the Biden Administration recently, Sean Casten, a member of the House of Representatives, believes that a separate hearing should be held on the stablecoins. In addition, the Biden Administration recommended that Congress formulate legislation as soon as possible to ensure that the stablecoins are subject to the federal framework in their stablecoin report, and urged Congress to make the stablecoin issuer subject to the same level of regulatory review and legal obligations as banks.

Denelle Dixon, executive director of the Stellar Coin Development Foundation, said that the report analyzed the risks and tried to regulate in a compliant manner, but it is too early for the solution to be implemented. We propose to use another way of supervision: it is required to 100% stablecoin reserves and appropriate reserve assets to control risks through supervision.

Moreover, Denelle Dixon mentioned that stablecoin has reduced the cost of small enterprises in international transfers, making the proportion of stablecoins in institutions and innovative industries continually expanding. It is not beneficial to insist on the current legal supervision of stablecoins. Perhaps the supervision of stablecoins can develop in the direction of issuer qualification requirements.

"We have a lot of work to do in terms of regulation, including defining the issuer's reserve funds, reserve requirements, liquidity and capital requirements, as well as risk management and operational flexibility requirements," said denelle Dixon.

Ensure Web3.0 Revolution Took Place in the United States

The meeting also focused on whether blockchain technology can reduce the cost of financial services and whether it can usher in Web3.0 era, return the information rights monopolized by technology giants to users.

Brian P. Brooks, executive director of Bitfury, a mining institution, explained the differences between Web1.0, Web2.0 and Web3.0 to representatives and stressed Web3.0 should "return power to the people".

Brian P. Brooks said: "Web 3.0 enables users to become the owner of the Internet, so that the Internet is not just a monopoly company." Brian P. Brooks described Web1.0 as "a well-designed garden surrounded by walls", and its design does not allow users to interact. Current Web2.0 can not only accept content, but also allow users to create content independently. And Web3.0 can give users actual control over the Internet in the future. Brian P. Brooks said that the government should not only see the new risks brought by blockchain technology, but also consider the solutions brought by decentralization.

About Web3.0, some congressmen also proposed that we should actively explore more reasonable regulatory regulations to ensure that Web3.0 revolution took place in the United States.

Patrick McHenry, a member of the Republican House of Representatives, said at the hearing, "cryptocurrency may have a greater impact on the future than the Internet. What is needed at present is reasonable rules, not subconscious regulation just out of fear of the unknown, which will only stifle the innovation ability of the United States and put the United States at a disadvantage in the competition. How can we ensure that the Web 3.0 revolution takes place in the United States?"

Other Questions About the Industry

At the hearing, members also asked about the use of bitcoin energy, large fluctuations in the price of encrypted money, excessive industry bubble, and whether the digital dollar would shake the position of the US dollar as the global reserve currency.

In response to the excessive energy consumption of bitcoin, Denelle Dixon, executive director of the Stellar Coin Development Foundation, responded: "cryptocurrencies have different types of consensus mechanisms, which use less energy or maybe more environmentally friendly." "We all need to focus on reducing energy use."

Maxine Waters, chairman of the Financial Services Commission, believes that more and more Americans use encrypted assets to make financial decisions, and the encryption industry is growing rapidly without supervision, making people vulnerable to fraud, manipulation and abuse.

Representatives of institutions did not respond effectively to this issue because it was left to regulators.

Jeremy Allaire, CEO of Circle, a stablecoin issuer, responded to the question of maintaining the status of the US dollar as a global reserve currency. She believed that the answer to the question was whether the United States supported the stable currency as a digital dollar. If so, it would help the United States become the most favorable competitor in the encryption industry. She also said that cooperation with the stabilization currency private company would be a new way. At present, cryptocurrency is already helping the United States compete globally, so there is no need for the central bank's digital currency. "The United States and the dollar are winning the digital currency race.".

Conclusion

The hearing lasted nearly five hours, and the media called it "the most friendly hearing to the encryption industry in history". Although it has not produced any decision that can immediately solve the problems of the encryption industry, the atmosphere has been greatly improved compared with the hearing attended by Mark Zuckerberg, Facebook CEO, two years ago. Representatives no longer blindly criticize, but hope to seek more understanding of the encryption industry through the hearing. It can be seen that policymakers are accepting this new financial product with an open attitude and trying to better regulate it.

Author: Jill Ma, Gate.io Researcher
*This article represents only the views of the researcher and does not constitute any investment suggestions.
*Gate.io reserves all rights to this original article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.