WASHINGTON—The chief executive officers of half a dozen cryptocurrency firms are set to appear before Congress on Wednesday, as lawmakers and regulators wrestle with how to bring the more than $2 trillion market under government oversight.
The House Financial Services Committee, led by
Rep. Maxine Waters
(D., Calif.), called the hearing in hopes of improving lawmakers’ understanding of crypto assets and how the sector fits into existing regulations.
The CEOs of stablecoin issuer Circle Internet Financial Ltd., crypto exchanges
Coinbase Global Inc.
and FTX Trading Ltd., bitcoin-mining firm Bitfury Group Ltd., cryptocurrency-payments system Stellar Development Foundation and blockchain firm Paxos Trust Co. are testifying.
“Currently, cryptocurrency markets have no overarching or centralized regulatory framework, leaving investments in the digital-asset space vulnerable to fraud, manipulation and abuse,” Ms. Waters said Wednesday.
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In prepared testimony, the executives touted the potential upsides of crypto and blockchain technology while playing down the risks. They also argued that cryptocurrencies don’t fit neatly within the existing structure of U.S. financial regulations and that lawmakers should consider writing tailor-made legislation for their industry.
“Because of their nascent stage of development and unique underlying technology, digital assets trade in markets that are fundamentally different from traditional financial markets,” Coinbase CEO
said in prepared testimony. “As a result, existing regulatory regimes often do not accommodate this new technology.”
Crypto supporters say that the technology can facilitate faster and cheaper transactions than traditional payment networks, and that it has the potential to foster innovation and financial inclusion. Policy makers worry that the rapid growth of crypto markets poses a threat to financial stability, that the sector is rife with fraud, and that criminals are using cryptocurrencies to evade taxes and circumvent anti-money-laundering laws.
Oversight of crypto markets is spotty in the U.S., where financial regulation is split among federal and state agencies.
The Securities and Exchange Commission in recent years has shut down dozens of so-called initial coin offerings for selling unregistered securities. Under Chairman
who was nominated this year by President
the agency has sought to persuade trading and lending platforms, such as Coinbase, to register as securities exchanges.
But the two largest cryptocurrencies by market cap—bitcoin and ethereum—are considered by many experts to be commodities rather than securities, meaning they likely fall outside the SEC’s jurisdiction. While the Commodity Futures Trading Commission regulates derivatives markets for commodities, its authority is more limited when it comes to the underlying instruments.
“There are gaps in our system,” Mr. Gensler said Tuesday at The Wall Street Journal CEO Council Summit.
Shiba Inu Coin’s recent surge, and subsequent fall in value, is part of a growing trend of meme coins that are rivaling some of the largest digital tokens in the world. WSJ retail investing reporter Caitlin McCabe explains why investors are pouring money into this meme based cryptocurrency. Photo: Amber Bragdon/Getty Images
—Alexander Osipovich contributed to this article.
Write to Paul Kiernan at [email protected]
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