The two have more in common than most think. Both are global, and social networks and virtual worlds are likely to be the method by which most users access and use crypto. International trade law and the international financial infrastructure grew up slowly over time, which was fine since the slow growth rates provided time to ponder.
The worldwide growth rate of crypto makes time to ponder difficult. The growth and complexity of crypto, as compared to existing regulated markets, is mind-boggling. Can we trust new more efficient blockchains? Are these markets and technologies similar? Bitcoin, Ethereum, stablecoins, smart contracts, exchanges, NFTs, Central Bank Digital Currencies, they all have a different role to play and so regulations would need to be specific to those roles – yet the roles continue to evolve even as more and more value is poured into them. So, the rapid growth rates put more people at risk of loss, while the technologies and the role each plays remain fluid, but Congress has started to ponder all of this and the crypto industry is ready to make it all seem simple.
Consider the industry claim that crypto will better serve the underbanked. We don’t yet know what the final transactional costs will be for bitcoin until the halving is completed, and yet transactional costs have already hit several high points and Exchanges need to make a profit. Consider this revelation from Coinbase Chief Financial Officer Alesia Haas at the Congressional hearing:
“Lawmakers including Rep. Ritchie Torres (D., N.Y.) asked about the potential for crypto to help immigrants send remittances between countries, a process that can be slow and costly through banks or money-transfer companies. Supporters often tout that as a use.
But such transactions remain uncommon. Using cryptocurrency involves a learning curve, mistakes can be irreversible, and there aren’t enough outlets offering crypto remittances to give it a competitive presence.
One of the few confrontational exchanges Wednesday took place between Rep. Brad Sherman (D., Calif.) and Ms. Haas over the amount of Coinbase’s transaction fees. Mr. Sherman asked if buying and selling $100 of bitcoin over two days could result in nearly $6 in fees. After initially saying she couldn’t answer the question, Ms. Haas eventually said depending on the product, he could be correct.
Mr. Sherman expressed deep skepticism of cryptocurrency’s potential uses and urged regulators to protect investors if Congress fails to pass meaningful legislation.
Most lawmakers displayed less-formed opinions of the crypto industry than they typically do of other sectors such as social media or banking. While testifying in Congress can often be uncomfortable for corporate bosses, some of the executives who participated in Wednesday’s hearing expected it to advance their cause.
“I think it went really, really well,” Circle Chief Executive Jeremy Allaire said after the hearing. “It was very comprehensive, not contentious.””
Overview by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group