The cryptocurrency world is rapidly evolving, with new developments emerging almost daily. However, America is in danger of falling behind its global competitors, according to Coinbase Chief Legal Officer Paul Grewal.
During Thursday’s hearing of the House Subcommittee on Digital Assets, Financial Technology, and Inclusion, Grewal emphasized the importance of the crypto industry while accusing U.S. regulators of lagging behind the global competition.
“America seems to be the only developed country dragging its feet,” he said. “As other countries are bringing crypto safely into the regulatory perimeter, we should be doing the same.”
“This is a Race to the top that the United States cannot afford to lose.”
In the wake of the FTX scandal, in which a multi-billion dollar company collapsed in a matter of days and left many investors penniless, Congress and regulatory bodies are seeking solutions to protect investors.
This has proved a complicated task, with much debate over the years about whether the Commodity Futures Trading Commission (CFTC) or the Securities and Exchange Commission (SEC) should have jurisdiction over digital assets. Thursday’s hearing revived the debate, with some legislators broaching a potential merger of the two regulatory bodies.
Mike Belshe, founder and CEO of crypto bank BitGo, argued that placing the entire industry under one regulatory umbrella is unwise.
“Today we classify at least five different types of assets as digital assets,” he said, offering examples like stablecoins, cryptocurrencies, DeFi tokens, digital property, and NFTs. “Having a single regulator for five very diverse and different activities probably isn’t exactly the right approach.”
In general, panelists and members of Congress disagreed on the precise way to go about regulation.
Grewal suggested a “light-touch regulatory framework” that would provide consumer protections while allowing for continued innovation. Advocating for a different approach, Policy Director at Duke Financial Economics Center Lee Reiners advocated for regulation on par with traditional financial entities—something that would be a radical change from the current state of play.
While the opinion was not represented at the hearing, some economists disagree that more regulation will protect investors.
Economist and founder of Euro Pacific Asset Management Peter Schiff—an outspoken critic of cryptocurrencies—told The Epoch Times that more regulation is unlikely to help investors but will add societal costs through higher taxes and a less efficient government.
“The amount of money the public loses as a result of regulation, often in the form of higher prices, is much higher than the amount of money they would have lost without regulation, if they would have lost at all,” he said. “Regulators end up stealing more than regular criminals.”
“We don’t need more government regulation. We need more free market regulation and personal responsibility.”
Law professor Tonya Evans expressed concerns about “the tremendous loss of wealth accumulation opportunities for communities of color—especially the black community—if investment and innovation opportunities in the crypto ecosystem are driven offshore.” Evans argued that piecemeal regulations—as opposed to a long-term unified plan—have confused industry leaders and forced many abroad.
The law professor said burdensome regulation in tandem with lobbying efforts by the major lending banks have disproportionately impacted the wealth of minorities.
“In this latest economic boom, systematically marginalized populations will continue to be left behind under the well-intentioned guise of investor and consumer protections and as well as not-so-well-intentioned fear, uncertainty, and doubt from legacy financial institutions and other parties with vested interest in seeing the crypto economy fail.”
Most panelists agreed on one thing: as the world moves toward a cashless society, the role of cryptocurrencies and blockchain technology will continue to grow. If the United States wants to remain competitive on the global stage and avoid leaving marginalized communities behind, it must take steps to adopt these new technologies.
