During a meeting of the Senate Committee on Banking, Housing, and Urban Affairs on Tuesday called “Crypto Crash: Why Financial System Safeguards are Needed for Digital Assets,” lawmakers from the United States spoke out against the cryptocurrency industry.
“While crypto contagion didn’t spread to the rest of the financial system, we saw glimpses of the damage it could have done if crypto moved into the banking system,” said committee chairman Senator Sherrod Brown in his opening remarks, referring to the collapse of the Bahamas-based crypto exchange FTX.com in November.
“These crypto disasters have shown what many of us already knew: Digital assets like cryptocurrencies, stablecoins, and investment tokens are speculative products run by reckless companies that put Americans’ hard-earned money at risk,” he said.
The hearing talked about things like how to regulate stablecoins, how to protect consumers, and how the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) should work together to regulate digital assets.
Lee Reiners, who is in charge of policy at the Duke Financial Economics Center, said that crypto threatens U.S. national security and doesn’t look much like what Satoshi Nakamoto, who created Bitcoin under a fake name, had in mind when he made the technology.
Some people, like Senator J.D. Vance, took a more positive view. He told regulators not to “destroy the dynamic upside of the digital asset world.”
Senator Tim Scott asked Gary Gensler, who is the head of the Securities and Exchange Commission (SEC), to come to Congress to talk about the agency’s actions in the past few weeks.
The SEC said that Kraken’s crypto staking programme broke securities law, so the exchange shut it down Thursday and paid a $30 million fine.
Soon after, the New York Department of Financial Services told Paxos Trust Company to stop making the Binance USD (BUSD) stablecoin, which is backed by US$16 billion.
The hearings come after the White House asked for more work to be done to regulate the growing industry. The White House said it would be a “grave mistake” to pass laws that would make the connections between crypto and traditional finance stronger because of the risk of a financial crisis spreading to other areas.
