The Senate Banking Committee put crypto on trial Tuesday as its chair sought to answer his own hearing’s titular question – “Cryptocurrencies: What are they good for?” – with a resounding “nothing.”
Painting the industry as a fraud-ridden, accountability-dodging, digital slot machine that enriches its creators and burns everyone else, Sen. Sherrod Brown (D-Ohio) warned in his opening remarks that crypto could endanger U.S. consumers and financial stability.
“There’s nothing democratic or transparent about a shady diffuse network of online funny money,” Brown said. He called for “smart regulations” that protect consumers from crypto “extortionists” and their “phony populist marketing.”
The hearing was almost certainly the testiest in a trio of crypto-themed inquiries Tuesday morning.
Elsewhere on Capitol Hill, House members debated central bank digital currencies (CBDCs) and Senators jousted on the ransomware wave. It was a sign of the growing influence that crypto wields in monetary policy and cybercrime.
Democrats on the Banking committee said that influence should be quashed, as they attacked crypto for myriad hypocrisies – particularly decentralization. Republicans, led by ranking member Sen. Pat Toomey (R-Pa.), who has invested in cryptocurrencies, were slightly more cautious; Toomey acknowledged “legitimate concerns about cryptocurrency” but showcased the upsides of blockchain technology.
Three very different witnesses – University College London Law Professor Angela Walch; Coin Center Executive Director Jerry Brito and Filecoin Foundation Board Chair Marta Belcher – offered sometimes irreconcilable viewpoints on the industry.
Walch described crypto as an unregulated time bomb primed to wreak havoc on traditional financial rails. Belcher called out the “myth” that cryptocurrency isn’t heavily regulated.
Lawmakers weigh in
Some senators used the hearing to push creative theories about market and mining trends. According to Sen. Jon Tester (D-Mont.), China’s bitcoin mining EXODUS is step one in a state-sanctioned plan to achieve dominance in the financial industry over the U.S.
“They’re shipping ‘em around the world because they know these guys can raise hell with our financial system,” he said.
Sen. Tina Smith (D-Minn.) posited that most DeFi derivatives instruments violate U.S. commodities law, a view echoed by CFTC Commissioner Dan Berkovitz. She later called out bitcoin’s massive carbon footprint, poo-pooing arguments that crypto can go green.
“We don’t have time to ride the cost curve down,” she said.
Toomey, in perhaps the hearing’s nerdiest moment, asked Brito how he should think about miner extractable value, the phenomena that sees network validators prioritize the processing of transactions that have paid higher fees (or “bribes,” as Walch said earlier in the hearing).
But it was Sen. Elizabeth Warren (D-Mass.) who hit crypto with the most verbal venom. In her telling, bitcoin decentralization is a fantastical narrative the network’s true power brokers – miners and corporations – leverage to achieve false moral supremacy over big banks.
“Instead of leaving our financial system at the whims of giant banks, crypto puts the system at the whims of some shadowy faceless group of super coders and miners, which doesn’t sound better to me,” Warren said.
