U.S. Sen. Sherrod Brown wants cryptocurrency regulation; Sen. J.D. Vance warns against harming ‘dynamic upside’

WASHINGTON, DC – US Senator Sherrod Brown used Super Bowl ads to document the implosion of cryptocurrency at a Tuesday hearing of the US Senate Committee on Housing, Banking and Urban Affairs.

During the 2022 contest, cryptocurrency stakeholders spent “a whopping $54 million on eight ads, promising Americans untold riches and the chance to make history,” said the Cleveland Democrat who chairs the committee. “Of course, we were not informed about the high fees, risk of loss, and outright theft that has plagued the cryptocurrency industry.”

He noted that there was not a single cryptocurrency announcement during this year's game. Over the past year, the FTX cryptocurrency exchange has shut down and its former CEO, Sam Bankman-Fried, has been arrested. Brown said the cryptocurrency market lost $1.46 trillion in value, cryptocurrency companies eliminated more than 1,600 jobs, and hackers and fraudsters, often linked to the Pyongyang and Moscow regimes, stole more. of 3 billion dollars.

“Now is the time to consider how to protect consumers from unregulated digital assets, and ultimately who we want our financial system to serve,” said Brown, who wants new regulations to require clear disclosures, ban transactions own account, protect client funds and prevent money laundering and fraud.

Digital cryptocurrency funds are not backed by governments, banks, or other institutions. Your property is tracked through decentralized computer networks based on blockchain technology. There is thousands of different types of cryptocurrencies, and their values ​​may fluctuate dramatically.

Previously valued at $32 billion, FTX was forced into bankruptcy after a run on deposits left it with an $8 billion shortfall, causing huge losses for investors who trusted the exchange with their money. The race was sparked by a report which questioned the stability of an affiliated company, Alameda Research, whose finances are intertwined with FTX. Bankman-Fried has pleaded not guilty to eight criminal charges, including wire fraud and money laundering.

Newly elected US Senator JD Vance, a Cincinnati Republican running for a venture capital firm, expressed a different vision of cryptocurrency. He said he has some, but acknowledges that it carries risks and drawbacks.

“Our regulatory approach should basically be to protect consumers and make sure we don't destroy the dynamic advantage of this,” said Vance, questioning whether Internet development would have been stifled decades ago if “authoritarian” regulations had been put in place.

Duke's Center for Financial Economics policy director Lee Reiners told him that the first Bitcoin transaction happened in 2009, and it didn't take 14 years for the internet to prove its worth. He argued that the cryptocurrency lacks fundamental value and "clearly people are just buying it because they think they can sell it to someone else at a higher price in the future."

Vanderbilt University Law School professor Yesha Yadav said that more consumers are entering the cryptocurrency market to “try new products,” and those products are becoming more sophisticated.

“I think we can continue to balance the need for market integrity and consumer protection, as well as making sure that we can innovate, but as long as we can get regulators on board, and industry to contribute to that dialogue in a consistent way.” Yadav told Vance.

Brown noted that the FTX collapse "focused attention on basic protections like safeguarding client money, so that companies can't use it for their own personal gain," and asked Reiners to explain the "urgency of developing better standards." for the custody of consumer assets.

Reiners said that the millions of Americans who used the failed crypto exchange are now unsecured creditors in its bankruptcy, while the assets of people who invest with the banks are protected by the Federal Deposit Insurance Corporation, and the Credit Protection Corporation. Securities Investors protects clients if their brokerage firm fails. .

“If there is going to be one change that I would recommend Congress focus on, it would be to require these crypto platforms to segregate customer assets from company assets, so that if these companies get into trouble, customers will still have access to their funds. Reins told him.

Sabrina Eaton covers the federal government and politics in Washington, DC, during cleveland.com and The plain trafficker. Read more of his work here.