In Senate Crypto Hearing, Bitcoin and Blockchain Get Defended, Derided

In Senate Crypto Hearing, Bitcoin and Blockchain Get Defended, Derided

On Thursday, October 11th, the U.S. Senate’s top banking committee held a hearing on cryptocurrencies and blockchain, wherein crypto-skeptic Dr. Nouriel Roubini and Coin Center’s crypto-visionary Peter Van Valkenburgh served as expert witnesses and offered competing views on the fledgling digital assets space. The senators present seemed generally open-minded throughout the bitcoin-centric hearing. 

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Hearing Sees ‘Dr. Doom’ Roubini, Coin Center’s Van Valkenburgh Face Off on Cryptoverse’s Merits

The open session hearing, officially titled “Exploring the Cryptocurrency and Blockchain Ecosystem,” was overseen by the Committee on Banking, Housing, and Urban Affairs Chairman Mike Crapo (R-ID) and its Ranking Member Sherrod Brown (D-OH).

The committee, or the Senate Banking Committee as it’s often colloquially called, wields congressional oversight over matters relating to federal monetary policy, banking, and beyond.

“There was no digital solution to the double spend problem,” Sen. Crapo said in an introduction that warmly acknowledged bitcoin’s first decade in existence and the cryptocurrencies and cryptoeconomic innovations that it has spawned to date.

Sen. Crapo later noted much of the recent coverage around the space has been negative, centering around hacks and intensified enforcement actions. But the Senator said that the enforcement atmosphere was getting clearer all the while for the good of a variety of stakeholders.

In his introduction, Sen. Brown also acknowledged that bitcoin was nearing its first decade anniversary, citing the financial crisis that Satoshi Nakamoto referenced in BTC’s genesis block as an understandable impetus for causing more and more Americans to turn to an “alternative banking system.”

Sen. Brown went on to note the flurry of scams that have cropped up in the digital assets space and the extreme volatility that these cryptocurrencies are oft subject to, and he also cited some of the issues raised in the recent New York Attorney General report that took aim at crypto exchanges.

Both of the committee’s leading senators concluded their remarks by signaling their interest in working through, and learning more about, digital assets.

At this point, the hearing shifted to the introductions of its two witnesses. First went Professor of Economics Dr. Nouriel Roubini, an early predictor of the 2007-2008 financial crisis and thus nicknamed “Dr. Doom.” Alas, then went Peter Van Valkenburgh, the director of research at the Coin Center think tank.

Dr. Doom: ‘Even the Flintstones Knew Better … They Used Clam Shells’

“Mother of all scams” … “the most over-hyped technology ever” … “this entire asset class is literally imploding now.”

These are but a few of the assertions fired off at the beginning of Dr. Roubini’s introductory comments, which, over the the span of five minutes, marked a blitzkrieg of criticisms against cryptocurrencies and their underpinning tech, blockchain.

“They are not currencies, bitcoin can only do 5 transactions per second,” Dr. Roubini said, later adding that, “No one uses bitcoin but criminals and terrorists.”

“Bitcoin is not scalable,” Roubini told the amassed senators. Image via CNBC Television.

For his part, Dr. Roubini said the main financial revolution taking place was a more general fintech revolution, one that was separately underpinned by “artificial intelligence, big data, and the Internet of Things.”

Van Valkenburgh Defends the Promises of Bitcoin, Blockchain

“Why is it revolutionary? Because it works without the need to trust a middleman,” Van Valkenburgh said of bitcoin near the start of his introduction.

The Coin Center research director went on to note the inefficient ledger hops that many bank-to-bank transactions have to undertake in mainstream financial transactions.

Van Valkenburgh cites an example of an Afghani entrepreneur paying her female coders with bitcoin later in his testimony. Image via CNBC Television.

To this end, Van Valkenburgh said:

“The lack of any corporation in between means that bitcoin is the world’s first public digital payments infrastructure. And by public I simply mean open to all and not owned by any single entity.

[…] With bitcoin, the ledger is the public blockchain and anyone can add an entry to that ledger transferring their bitcoins to someone else. And anyone, regardless of their nationality, race, religion, sex, or credit-worthiness can (for absolutely no cost) create a bitcoin address in order to receive payments digitally.”

“We need light-touch pro-innovation policy to ensure that these innovations flourish in America for the benefit and security of all Americans,” Van Valkenburgh later concluded.

Committee Senators Keep It Brief, Balanced

As the questioning phase of the hearing hit its stride, senators on both sides of the aisle asked questions running the gammut, with queries being posed about how cryptocurrencies can scale, how retail investors could be protected from Initial Coin Offering scams, how much power bitcoin “mining oligopolies” have, and more.

It’s also worth mentioning that after introductions, Dr. Roubini became less bombastic in his remarks, though he didn’t cede any of his overall skepticism toward the innovations under discussion. Overall, the hour-long session was balanced, with the senators routinely giving Van Valkenburgh and Dr. Roubini opportunities to respond to the other’s assertions.

“What should we be thinking about to secure [cryptocurrencies],” Sen. Elizabeth Warren (D-MA) asked of Van Valkenburgh at one point in the context of protecting investors, a question that, like many of the ones posed during the hearing, focused on how cryptocurrency usage could be fostered more responsibly.

Van Valkenburgh also notably pushed back on Roubini’s characterization that bitcoin was a haven for “criminals and terrorists.” The research director said in his liaisons with law enforcement officials, they’ve voiced that the auditability of the Bitcoin network’s ledger has made tracking crimes on its blockchain, e.g. BTC-e’s financial fraud, relatively easy.

The Takeaways

The hearing saw no ultimate oversight conclusions reached. However, the session marks yet another step toward increased congressional familiarity with the cryptocurrency arena, for better or for worse.

What that reality poses for the regulatory future of America’s nook of the cryptoverse remains to be seen.

“I appreciate the opportunity to present the committee with real world examples of the value public blockchain networks can bring to society, and to respond to some of the criticisms that have been leveled against them for years,” Van Valkenburgh commented after the hearing’s conclusion.

Coin Center’s executive director Jerry Brito similarly echoed such optimism in his own post-session remarks:

“There are many good reasons to be skeptical about cryptocurrency technology, but we didn’t hear any of them today. The truth is that cryptocurrency is neither a calamity not a panacea. Policymakers need to be watchful but let it develop.”

What’s your take? Do you think more congressional hearings pertaining to crypto and blockchain are needed in short order? Nay? And what about today’s Senate Banking Committee hearing, how do you think it went? Let us know where you stand in the comments section below.

Images via CNBC Television, Financial Innovation Now

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