On Tuesday, while testifying to the Senate Banking Committee, Lee Reiners, policy director at the Duke Financial Economics Center, recommended that banking agencies restrict the crypto industry from accessing the banking system.
The Senate Banking Committee was discussing what would be required to shield the traditional financial system from the vices of crypto. The hearing titled “Crypto Crash” explored why crypto needs tighter regulation and safeguards to protect investors, especially after last year’s contagious market collapse.
Simultaneously, Sherrod Brown, chairman of the Banking Committee, opened the hearing with fierce criticism. Calling out the industry for not running ads at this year’s Super Bowl, he mocked Matt Damon’s famous ad on behalf of CryptoCom. He said:
It turns out fortune doesn’t favor the brave. It favors the wealthy insiders.
Reiners followed by echoing Brown’s skepticism, claiming that crypto’s “killer use case” has still not revealed itself after over a decade. He also claimed that crypto had produced nothing beneficial during the 14 years since Bitcoin’s whitepaper was published. He believes that most crypto investors do it to sell the asset at a higher price in the future.
Most people invested in crypto simply because they thought they could sell it to someone else at a higher price in the future.
Further, he highlighted the potential harms of cryptocurrencies. He said there is ample evidence of the harm crypto can cause, including hacks, scams, terrorist financing, evasion of sanctions, and jeopardizing the nation’s climate goals.
Considering the threats, the professor said that he “agrees with the sentiment” that crypto should be restricted from access to the banking system as much as possible. However, as long as crypto remains legal, banks must not discriminate against the industry.
In addition, the professor recommended that banking agencies release information to the public exposing all of the ways banks are exposed to crypto assets. He also suggested that agencies become more prescriptive about what crypto-related activities banks cannot engage in – including a rule against holding crypto on their balance sheets.
The discussion session witnessed several important figures of the US regulatory bodies. One of them is Linda Jeng, a former member of the Securities and Exchange Commission (SEC), Commodity Futures Trading Commission (CFTC), and Federal Reserve.
Jeng also testified before the committee; however, her belief in crypto’s innovative power was more optimistic than Reiners. Although even, she admitted that regulatory clarity in the industry is severely lacking. She said:
Congress urgently needs to pass thoughtful, comprehensive legislation establishing a federal regulatory framework with digital assets, addressing both securities and non-securities in this complex and nuanced space.
Crypto regulation has one of the most widely discussed topics among the regulators in the States. In December, an annual report from the US Financial Stability Oversight Council (FSOC) highlighted the requirement for crypto regulation. The report called on lawmakers to pass appropriate legislation addressing regulatory gaps for crypto-related activities. It urges the members of Congress to pass legislation providing “explicit rulemaking authority for federal regulators over the spot market for crypto-assets.”
Todayq News reported last month that the White House Office of Science and Technology Policy (OSTP) is looking forward to receiving feedback from the masses that would be utilized for developing a cryptocurrency policy. The OSTP briefed that public opinion on the matters will be vital in identifying critical focus areas in researching and developing cryptocurrencies. The organization is working on the policy on behalf of the Fast Track Action Committee (FTAC).