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Democrats and Republicans in Congress have wildly divergent views on cryptocurrencies.
Speaking at a congressional hearing on Wednesday, Democrats argued for broad “guardrails” to protect consumers and investors, saying markets have become plagued by manipulation, fraud and stablecoin tokens that could actually destabilize the wider financial system.
“The integration of digital assets lays the groundwork for whole swaths of the economy to invest in this market,” Rep. Don Beyer (D-Va), chairman of the Joint Economic Committee, said in a statement. Still, cryptos “create significant consumer protection issues,” he warned. He noted that retail investors may have been duped during the recent crash of the Squid Game token, which Binance, the world’s largest crypto exchange, is investigating. The token has no official affiliation with the hit Netflix series.
The scrutiny in Washington may create more unease among crypto investors, and this could be one of many factors weighing on the market.
Bitcoin
continued its fall on Thursday, trading down more than 2% and falling to $58,283, according to CoinMarketCap. Bitcoin is now well off its highs around $69,000, reached on November 10.
Ether
was also lower, falling 0.4% to settle at $4,134. Other cryptos fared worse, including Solana, down 4%, Dogecoin, down 5.4%, and Shiba Inu, down 10.9%.
Beyer urged lawmakers to pass a bill he introduced this summer, the Digital Assets Market Structure and Investor Protection Act. The 58-page measure includes provisions to categorize certain cryptos as securities, subjecting them to oversight by the Securities and Exchange Commission, and it would create a broad definition of digital assets as commodities, placing oversight in the hands of the Securities and Exchange Commission. Commodity Futures Trading Commission.
Beyer also wants the Treasury Department to establish rules for stablecoins — tokens designed to maintain a value of $1 — arguing that they pose systemic financial risks. According to him, stablecoins should be subject to capital reserves and liquidity requirements similar to the rules for bank deposits and money market funds. And he would like to ban stablecoins already on the market if they do not receive federal approval.
According to an analysis by law firm Latham & Watkins, Beyer’s bill “would not grandfather existing stablecoins,” requiring issuers to seek federal approval.
Congress may not have to act on stablecoins as the Biden administration is already working on rules to oversee the tokens, recently publishing recommendations regulate the industry.
The Republicans on the panel weren’t exactly on the same page.
Sen. Mike Lee (R-Utah) has urged Congress to allow the technology to thrive, saying Congress should resist “one size fits all” and calling it “pretty scary, especially when it targets cryptocurrency. “. Lee warned that rigid rules would send companies developing blockchain technology overseas and added that Congress should apply the rules already in place with a “light touch”.
Even starker warnings came from Sen. Ted Cruz (R-Tex), an outspoken advocate for crypto technology and Bitcoin mining, which is rapidly expanding in Texas.
“The only thing capable of messing it up is the US Congress, and I deeply fear that Congress is already doing that,” he said.
Cruz warned that the new infrastructure package includes an overly broad definition of crypto “brokers,” imposing unworkable reporting requirements on some transaction intermediaries. He noted that the law makes it a crime to fail to report commercial crypto transactions over $10,000, which is similar to the requirements for cash transactions.
He also had harsh words for lawmakers who might vote for new crypto rules without a full understanding of the technology. “I doubt there are five members of the US Senate who could tell you what bitcoin is,” Cruz said. Congress should legislate after studying crypto in more detail, rather than “using a machete”.
Cruz introduced a bill this week that would repeal the tax reporting provisions of the Infrastructure Act. His passage is unlikely in the Democratic-controlled Senate. And the new rules won’t go into effect until 2024, giving crypto lobbyists and their allies in Congress time to mount legal challenges.
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