A Senate panel was recently held in which three expert witnesses testified regarding steps the federal government can take to guard digital assets like cryptocurrency.
The hearing was opened by Sen. Sherrod Brown (D-Ohio), who drew a contrast between the myriad of crypto commercials during the 2022 Super Bowl and the lack of similar commercials during the 2023 Super Bowl.
“They didn’t tell us about the high fees, the risk of loss, the outright theft that plagued the crypto industry,” Brown said about the 2022 ads.
The industry, according to Brown, has “imploded,” having lost almost $1.5 trillion in 2022. Brown warned that the “nightmare” hasn’t yet ended as Congress learned more about FTX’s collapse and considered introducing regulation which would protect innovation and consumers.
‘Financial Criminals Love Crypto’
Sen. Elizabeth Warren (D-Mass.) promoted bipartisan crypto legislation targeting money laundering.
“Big-time financial criminals love crypto,” said Warren, who called crypto the “payment method of choice” for drug traffickers, North Korean hackers and ransomware attackers. Warren said $20 billion worth of illicit transactions took place on the crypto market in 2022.
Hackers backed by North Korea stole $1.7 billion of cryptocurrency in 2022, according to Chainalysis. Experts said the country is using crypto to fund its nuclear weapons program.
Lee Reiners, Duke Financial Economics Center’s policy director, said that the “pseudonymity” of crypto makes it well-suited for criminals and that ransomware hackers wouldn’t exist without crypto because it is the “exclusive” payment method for them.
Warren said that’s why her and Sen. Roger Marshall (R-Kan.) are reintroducing the money laundering bill to deal with crypto crimes and stop crypto flowing to drug traffickers in Iran and North Korea.
Reiners: ‘Predatory Inclusion’ Taking Place In Crypto Market
Sen. Tim Scott (R-S.C.) noted that 44 percent of crypto owners and digital asset traders in America are people of color or new investors. However, Reiners referred to this inclusion as “predatory.”
Reiners noted that most people who have invested in crypto have ended up losing money, noting that a “plurality” of these people are low-income Americans and minorities.
Reiners compared the situation to subprime loans which created the financial crisis of 2008, noting that that involved minority and low-income communities being “explicitly targeted” with risky products and losing money as a result.
Reiners also criticized Fidelity Investments for offering access to crypto to investors in 401(k) plans, likening this to letting Powerball tickets end up in 401(k) plans.
“Crypto’s just gambling” Reiners said.
Vance: Crypto Is Like The Internet
Sen. J.D. Vance (R-Ohio), a crypto owner, compared cryptocurrency to the internet, stating that “we don’t really know what it is yet,” stating we don’t know enough about crypto’s underlying technologies or what regulatory approach we should take to protect consumers without destroying crypto’s upside.
Vance wondered how people would describe the internet in the 1970s and 1980s, before it was a major part of everyday life, and noted that if an overbearing approach had been taken to regulate it before it was well-understood, a lot of the internet’s upsides might have been destroyed.
Linda Jeng of Georgetown Institute of International Economic Law, as well as Sen. Thom Tillis (R-N.C.), praised this analogy, but Reiners did not, pointing out that bitcoin has been traded since 2009.
Reiners said he does not expect crypto to indefinitely generate future returns.
U.S. At Risk Of Falling Behind In Regulation Of Crypto
Jeng, as well as Yesha Yadav of Vanderbilt University Law School, testified that the United States is not taking a leading role in the regulation of crypto, possibly allowing other countries to set standards and rules that the rest of the world will follow regarding crypto.
Yedav called the U.S. “extremely behind the curve” regarding crypto regulation, noting that other entities like the European Union have instead taken the lead regarding crypto regulation.
Jeng noted that other countries are ahead of the United States in terms of crypto regulation, including China, Singapore, Hong Kong and Australia.
Reiners, however, disputed the argument that America wasn’t leading in terms of crypto regulation, stressing that it’s important for America’s policy to be right instead of first.
Reiners argued that other countries are embracing crypto as a gamble which they hope “can help juice their economy,” pointing out that the Bahamas “rolled out the red carpet” for FTX, “and obviously it didn’t turn out so well.”
Reiners argued that crypto is harming society more than it is helping society.
Scott Criticizes SEC
Scott levied criticism at the SEC, saying they should have acted to prevent catastrophes in the crypto market.
Scott asked if the SEC was “asleep at the wheel” if they had the tools they needed.
Americans Have Lost Millions In Crypto Market
Recent collapses of cryptocurrency exchanges such as FTX and Gemini Earn have seen Americans’ ability to withdraw funds from their crypto accounts frozen, causing them to lose millions of dollars worth of digital assets.
In addition, Americans have lost significant amounts of cryptocurrency to crypto scams and methods of crypto theft such as SIM card hacks.
If you have lost cryptocurrency to a crypto exchange collapse, crypto theft or a crypto scam, you may be eligible for financial compensation. Nadrich & Cohen is representing crypto loss victims on a contingency fee basis, meaning no fee is charged until and unless we obtain financial compensation for you. For more information, click here.