By
Steve Muchoki
April 18th, 2024
Circle’s CEO Jeremy Allaire said that his company is doing everything to move its business outside the U.S. Without national policy framework about digital assets, he said that the U.S. will not be the leader anymore in this field.
Today’s hearing by the Senate Banking Committee on regulatory frameworks for cryptocurrencies and blockchain technology started with congressman Brown asking which of new technologies (meaning, blockchain and cryptocurrencies) and in what way will help American citizens.
Testifying as expert witnesses will be Circle CEO Jeremy Allaire, representing the Blockchain Association; Rebecca Nelson, a member of the Congressional Research Service specializing in international trade and finance; and Mehrsa Baradaran, a law professor at the University of California Irvine School of Law.
The first speaker was Allaire who said he co-founded Circle in 2013 in order to make it easier for people to create value with the same ease as they were creating information and content on the internet.
He also noted that the banking system is full of cases of money laundering that really often goes undetected.
He said:
“There are cyber criminals and hostile nations and situation seems to be getting worse. Access to capital is limited and very few people have the possibility to invest in startups.”
He added that we’re about to see a series of profound changes. Digital currencies, says Allaire, will proliferate and become available on every mobile phone.
“Commerce relationships will increasingly be growing on blockchain. New decentralized forms of digital identity will become available and used for the fight against the crime.”
Allaire also said that uncertainties that US Regulators have, have led to the loss of significant opportunities.
“This had material impact on global economies and we can see now the Asia leading the way”.
He also mentioned that because of that, they went on to receive a full Digital Assets Business Act license in Bermuda for its crypto exchange Poloniex. 70 percent of Poloniex users hail from beyond the U.S. and the new Bermuda-based entity will handle those accounts from now on.
“We are doing everything to move our business outside the U.S. Without national policy framework about digital assets, I’m afraid that the U.S. will not be the leader anymore and for sure it will not be ready for what this can bring”, concluded he.
He noted that digital assets should be regulated, but with new definitions of them as an asset class.
On the question Senator Mark Warner asked about the literal meaning of the 1:1 backing of the Facebook‘s Libra, Allaire answered that while the first wave of these types of digital currencies were focused on establishing a global digital currency, the critical mainstream use cases for the financial services sector needed the development of stable coins, with Libra as an example.
“If you have a 100% reserve, where is Libra going to make money on this?”
Nelson mentioned how in 2009, Bitcoin was launched as a first cryptocurrency and today more than 22 hundred cryptocurrencies are in circulation.
She said:
“Some banks and financial corporations are looking to take crypto into mainstream. There is a certain patchwork of the crypto regulations emerging around the world – Malta, Singapore and Swiss are striving to become crypto hubs. On the other hand, some countries as China, Taiwan or India are restricting it. Differences in international regulations can lead to instability.”
She also added that Facebook has the potential to become a game-changer for cryptocurrencies and mentioned that G7 said Facebook’s Libra will need to be tightly regulated or they could destabilize the global economy.
Baradaran said that there’s no wonder that so many people embraced Bitcoin. She explained her position the following way:
“I’m glad that cryptocurrencies are aspiring to help unbanked, however, in the U.S. that is not going to resolve problems. Bitcoin goal is to establish payment system available to all. Federal Reserves are open to only banks. Banks are not serving to low income families who are paying millions of dollars to be cashed out. This can and must be updated.”
She added that the Congress has to offer real-time payments.
“Innovator’s job is to imagine a bright new world and it is the regulator’s job to see what could go wrong. No one wants to see the U.S. losing its competitive edge. However, innovations and math were never the problems – the problem is humans. Cryptocurrencies are not significantly different from derivatives markets. Regulators should look to the safety of the financial sector. Technology and innovation cannot undermine the public policy”, said she.
She also asked:
“Do we really need Libra?”
Senator Van Hollen said that their failure to move forward with a real-time payments system is costing consumers billions of dollars.
As presumed, most of the questions were about the Facebook/Libra undermining the entire industry as the focus has shifted from enabling innovation to data abuses and illegal operations. Facebook’s arrogant endeavour at creating a self-sovereign global currency has become in a way – a crypto trap.
On the other hand, Senator Mark Warner said that he believes that blockchain, or distributed ledger technology, has “great potential.”
Senator Jon Tester added that cryptocurrencies are coming and that they need to be ready for it. He also said he doesn’t think they are going to leave blockchain tech and digital asset oversight entirely up to regulators – perhaps foreshadowing forthcoming legislation.