“I don’t think you’ve persuaded anyone,” says U.S. Senate
Senate questions crypto and calls for more regulatory clarity
Just yesterday, we wrote profiles on the expert witnesses who testified including Jeremy Allaire, CEO of crypto exchange-operator Circle, University of California Irvine law professor Mehrsa Baradaran and Congressional Research Service international trade and finance specialist Rebecca Nelson. Today, we’re going to dive into a recap of the hearing regulation.
Both panelists and senators alike expressed skepticism about crypto’s ability to broaden access to global financial services and as much as we are tired of talking about libra, many questions lead back to Libra’s goal of “banking the unbanked”
Can Crypto “Bank the Unbanked”?
In Baradaran’s opening statement, she threw doubt into the air saying the problem of financial inclusion was due to policy, not technology. She said that the federal reserve and other institutions already have the power to bank the unbanked, saying;
“The problems of low-income and underbanked customers is not that they’re unsatisfied by existing tech, the problem is they live in a banking desert … there is no place to [use a card] because banks are no longer interested in serving those customers. None of these cryptocurrencies can do that until there is wide-scale adoption”.
Baradaran believes that unbanked individuals need a point of access, and while blockchain is one technology that can help, “there are many easier ways” of providing this access.
During the hearing, Senator Brian Schatz (D-Hawaii) questioned Jeremy Allaire, on this matter.
“What it sounds like to me is tech people wanting to wave a wand and skip a bunch of steps and avoid the tough politics of doing things for people and say “we’ve got new tech that will solve all this stuff””.
There is no question the blockchain will become a widely used tool but Schatz argued that it didn’t mean it would solve the problem of banking the financially excluded. He concluded;
“ I don’t doubt the potential for this tech, I just don’t think that it’s going to bank low income communities and I don’t think you’ve persuaded anyone here that its going to do that”.
Foreign Operations
During the hearing, many questions arose pertaining to cryptocurrency companies choosing to operate in foreign countries, similar to Libra. Jeremy Allaire, who’s company, Circle, recently moved some of its operations to Bermuda, provided reason. According to Allaire, the regulatory definition of crypto is too narrow in the U.S.A , stating “ there is a fundamental mismatch between the regulatory guidance and the nature of these assets”. Meanwhile, nations that have better-defined official policy around cryptocurrency are benefiting from that clarity. Rebecca Nelson said crypto “hubs” are popping up more and more, as places like Switzerland and Bermuda solidify their regulatory frameworks in an effort to attract firms to their shores.
In regards to law enforcement, Allaire suggested that the Financial Action Task Force (FAFT) guidelines would be a good starting point to getting the world on the same page. Those guidelines were accepted by multiple sovereign nations and coalitions including the G20, meaning most jurisdictions would comply with FAFT.
U.S Sen. Catherine Cortez Masto (D-NV) said she believes blockchain’s potential to shift multiple sectors won’t fade, and requires lawmakers to examine the possibilities for the technology with an eye toward the future.
If we as a country do not lead in this technology, China or some other country is going to do so”
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