FinTech law professor tells Congress that crypto should be restricted from the banking system
Lee Reiners, policy director at the Duke Financial Economics Center, recommended that banking agencies restrict the crypto industry from accessing the banking system while testifying before the Senate Banking Committee on Tuesday.
The professor claimed that crypto has not benefited in the 14 years since Bitcoin’s whitepaper was published.
What to do with crypto
The hearing, entitled “Crypto crash,” explored why crypto needs tighter regulation and safeguards to protect investors, especially in the wake of last year’s contagious market collapse.
Banking committee chairman Sherrod Brown opened the hearing with fierce criticism. Urges the industry not to run ads on this year’s event Super Bowl, he mocked Matt Damon’s famous ad on behalf of CryptoCom: “It turns out fortune doesn’t favor the brave. It favors the wealthy insiders,” he said.
Echoing Brown’s skeptical tone, Reiners argued that crypto’s “killer use case” still hasn’t revealed itself after over a decade.
“Most people invested in crypto simply because they thought they could sell it to someone else at a higher price in the future,” he said. Rather, he argued that there is ample evidence of the harms crypto can cause, including hacksfraud, terrorist financing, sanctions evasion and jeopardizing the nation’s climate goals.
Given the dangers, Reiners said he “concurs with the sentiment” that crypto should be restricted from accessing the banking system to the greatest extent possible. But as long as crypto remains legal, banks are required not to discriminate against the industry.
The professor recommended that banking agencies release information to the public that reveals all the ways banks are exposed to crypto. He also suggested that agencies become more prescriptive about what crypto-related activities banks can’t engage in — including a rule against keeping crypto on their balance sheets.
Accelerate regulation
Linda Jeng – a former member of the SEC CFTC, and the Federal Reserve – was also on hand to testify. Her belief in crypto’s innovative power was more optimistic than Reiner’s – although even she admitted that regulatory clarity in the industry is seriously lacking.
“Congress urgently needs to pass thoughtful, comprehensive legislation establishing a federal digital asset regulatory framework that addresses both securities and non-securities in this complex and nuanced space,” she said.
Senators Cynthia Lummis and Kirsten Gillibrand drafted bipartisan legislation last year to create basic standards for the proper regulation and classification of digital assets. The bill received scrutiny from both regulators and Bitcoin bulls like.
