Executives from cryptocurrency firms testified before a House committee Wednesday, giving lawmakers an overview of their nascent industry and calling for clarity on rules governing the asset class and underlying technology.
The uncertain state of digital asset regulation is hampering the industry's development, said Charles Cascarilla, CEO and co-founder of Paxos, a regulated financial institution and a blockchain infrastructure platform, who was one of six panelists to testify before the House Financial Services Committee.
"The solution is not to shoehorn digital asset operations into a regulatory system designed for earlier generations of financial assets," Mr. Cascarilla said. "We have an opportunity to learn from past failures and build something more efficient and effective.
If lawmakers and regulators stifle the industry, then issuers, talent and capital will flee to more welcoming jurisdictions, Mr. Cascarilla added. "We need government's support to create a new, more secure, more competitive financial system," he said. "The benefits of getting this right are enormous, but so are the consequences of getting it wrong."
Committee members from both parties asked detailed questions of the panelists and generally expressed support for the asset class and technology behind it.
Chairwoman Maxine Waters, D-Calif., highlighted environmental concerns associated with cryptocurrency in her opening statement, stating that the computing power needed to mine some of the coins "can rival the energy needs of entire countries, like Sweden or Argentina." But, she added, "the promise of digital assets of providing faster payments, instantaneous settlements and lower transaction fees for remittances are areas that our committee is exploring."
The committee's ranking member, Patrick McHenry, R-N.C., said Congress should work in a bipartisan way to provide the clarity crypto innovators and entrepreneurs need in order to allow the market to thrive and also protect consumers by preventing fraud and manipulation.
"We need reasonable rules of the road, we know that," Mr. McHenry said. "We don't need knee-jerk reaction by lawmakers to regulate out of fear of the unknown, rather than seeking to understand. And that fear of the unknown in a move to regulate before understanding will only stifle American ingenuity and put us at a competitive disadvantage."
Brian P. Brooks, CEO of Bitfury Group, which he described as providing infrastructure products and services that support various aspects of the cryptocurrency ecosystem, said the U.S. needs to have parity for crypto activity similar to traditional finance.
"If I'm a crypto lending platform, I should probably be regulated by the FDIC; if I'm a crypto trading platform, I should probably be regulated by the CFTC and SEC," he said. "But somehow we treat crypto — because it's new — as different from everything else, and I'm going to argue that crypto is just a step function improvement in the system. We already have a regulatory system, the laws are super clear how it works, but there's something about crypto that scares people, I don't know what it is, maybe it's just because it's new."