WASHINGTON, Dec 8 (Reuters) – Top executives from six cryptocurrency firms will on Wednesday tell Congress to tread lightly in imposing new rules on digital assets – or risk sending activity underground or outside the United States.
Ahead of a hearing at the U.S. House Financial Services Committee starting 10:00 EST, executives leading some of the world’s biggest crypto companies indicated in prepared testimony they will generally support clearer rules. But they will emphasize that overly restrictive ones would not stifle the activity, but merely push it away from U.S. reach.
“Without tailored legislative solutions that are openly debated with public participation, the United States risks unnecessarily onerous and chilling laws and regulations,” warned Alesia Haas, chief executive of Coinbase Inc, in testimony released on Tuesday.
“This could effectively push crypto activity underground or to offshore exchanges that have little or no compliance programs.”
The testimony, published by the panel ahead of the hearing, sets the stage for what is expected to be a closely watched and high-stakes event, as U.S. lawmakers publicly press cryptocurrency executives to defend their business and flesh out ideas for policing them.
“To us, it would be productive if executives present a pro-active agenda for what Congress can do to ensure consumer and investors are protected, the government gets its taxes and criminals and terrorists are blocked from using crypto,” Jaret Seiberg, an analyst at Cowen Washington Research Group, said in a note to clients.
Several executives are arguing for a light touch.
“There are a number of examples of U.S. regulatory decisions that have driven legitimate activity offshore, in ways that harm U.S. investors, innovators, and workers,” said Bitfury CEO Brian Brooks.
“There is a reason why crypto talent is no longer concentrated in Silicon Valley, the birthplace of the original commercial internet.”
The rapid growth of cryptocurrency, and in particular “stablecoins,” which are digital assets whose value is pegged to traditional currencies, has caught the attention of regulators, who fear they could put the financial system at risk if not properly monitored.
Some policymakers, such as Senator Elizabeth Warren and Securities and Exchange Commission Chairman Gary Gensler, are also concerned the products could be utilized for illicit purposes, or to take advantage of unsuspecting consumers.
In November, a U.S. Treasury-led working group recommended Congress pass a law specifying stablecoins should only be issued by firms that have their deposits insured, like banks. Wednesday’s hearing could serve as a good indication for how likely Congress is to take up any such digital currency legislation, according to analysts.
Executives said they would welcome regulatory clarity, but that overly restrictive rules could prove counterproductive.
“Stablecoins and internet-native capital markets are not too big to fail, but they are now too big to ignore,” said Jeremy Allaire, CEO of Circle Internet Financial. “Policy frameworks need to support an open and competitive playing field, and allow new technologies to flourish.”
Proponents say stablecoins could revolutionize payments by offering a reliable, low-cost, instant way to transfer funds across the globe. The executives say the United States should play a leading role in fostering that technology, just as U.S. rules allowed the Internet to flourish in its early growth in the 1990s.
“Let’s work together to ensure that U.S. policymakers are the ones that set the stage for a productive, smart, regulatory roadmap for this technology around the world,” said Denelle Dixon, head of the Stellar Development Foundation, in her prepared testimony.
“I hope that we can all agree that crypto and stablecoin shouldn’t be buzzwords, thrown around to incite fear of the unknown.”
(Reporting by Katanga Johnson and Pete Schroeder in Washington; Editing by Megan Davies, Dan Grebler and Alison Williams)
Photo – EPA-EFE/SASCHA STEINBACH