From Positive Regulation to Ponzi Comparisons: What Went On at US Congress Crypto Hearings

July 18 proved to be an important day for the crypto industry, as two separate U.S. Congress hearings centring the matter were held: one by the House Agriculture Committee, and the other one by the House Financial Services Committee.

Digital asset's regulatory status might be fluid Both scholars present, Gensler and Fairfield, have addressed perhaps the main question troubling US regulators: what is a Bitcoin? Currently, different US agencies view digital assets differently: for instance, the Securities and Exchange Commission treats them as securities, while Commodity Futures Trading Commission considers them commodities.

Now, the witnesses proposed that a digital token's legal status is in fact fluid: when it is marketed at a "Pre-functional" moment in its development - i.e. during an Initial Coin Offering - then the sale at that moment is an investment contract and thus a security, lying in the legal field overviewed by the SEC. Further, when crypto tokens are realized and become used in a decentralized network a commodity becomes relevant to the CFTC. That could settle the Ethereum dilemma: last spring, the token was rumoured to be classified as a security.

Ness of Perkins Coie law firm contributed by claiming that over-aggressively extending securities classifications could seriously disturb the crypto space, which has evolved to cater value transfers "At the speed of software."

Blockchain's heroic deeds didn't go unnoticed, although the technology is still mature Fairfield stressed that "The potential value of blockchain technology is considerable", and outlined seven examples of the technology's success in different areas, including: corporation strategies, immediate and international payments, digitizing securities, secure transactions and transparent voting systems that would minimize the risk of facing another international scandal after a major election.

Gorfine of LabCFTC noted that while the crypto technology allows for peer-to-peer transactions, "Most activity takes place through a new type of intermediary where you can apply AML and KYC rules".

She outlined Malta and Switzerland with its "Crypto Valley" as prime examples of positive adoption, and mentioned initiatives in other countries that are less known for championing the technology, like Afghanistan where Roya Mahboob, CEO and co-founder of Digital Citizen Fund, enrolled over 9,000 Afghan women and girls in education programs.

He then proceeded with the mandatory comparison of crypto space to a "Ponzi scheme," and asked what backs Bitcoin's value.

The House Financial Services Committee hearing: call for a crypto ban, CBDCs are "One of the worst financial ideas".

A parallel congress hearing's discussion was not that fruitful for the industry, as the head of the Federal Reserve Jeremore Powell deemed cryptocurrencies as "Dangerous of investors", congressman Brad Sherman went as far as to suggest "Prohibit[ing] U.S. persons from buying or mining cryptocurrencies", and Alex Pollock, senior fellow at the R Street Institute, argued that "To have a central bank digital currency is one of the worst financial ideas of recent times".