Officials in Washington must be commended for their active engagement on cryptocurrency matters. It is encouraging to see that both the House and Senate held recent hearings on cryptocurrency and that members of the Trump administration are giving cryptocurrency the attention that it deserves through appropriate channels like the Financial Stability Oversight Council.
Equally notable is the Security and Exchange Commission’s effort to help issuers of cryptocurrency easily ascertain whether or not their cryptocurrency is a security.
Cryptocurrency is receiving attention in Washington because it could revolutionize our payment systems or serve as a 21st century medium of exchange that will enhance commerce throughout the world. It could lead to greater access to affordable financial services and products for underbanked people. It also could help companies raise the capital they need to prosper.
Even with all the potential of cryptocurrency, a thorough public examination must continue on the important cryptocurrency policy matters such as privacy, trading, national security, and monetary effects.
Cryptocurrency concerns have not gone unnoticed by President Trump who recently tweeted that he is “not a fan of Bitcoin and other Cryptocurrencies,” that “Crypto Assets can facilitate unlawful behavior,” and that their values are based on “thin air.” He also opined that if cryptocurrency companies “want to become a bank” that they need a charter and be subject to banking regulation.
Cryptocurrency at the center of debate in Washington makes it more likely that the potential impact of it is fully thought through; enabling decision-makers, including American consumers, to make informed choices when it comes to the potential adoption of cryptocurrency.
That being said, it is important to remember that Washington must be careful not to overregulate cryptocurrency, preventing the American people from their opportunity to see where cryptocurrency innovations could go.
One example of going too far would be for Congress to move forward with draft legislation called the Keep Big Tech out of Finance Act. This draft, written by House Financial Services Committee Chairwoman Maxine Waters’ (D-CA) staff, would prevent some of our nation’s most prominent technology companies from participating in the ever evolving world of cryptocurrencies.
Specifically, the legislation bans technology companies with annual global revenue of $25 billion or more, that are “predominately engaged in the business of offering to the public an online marketplace, an exchange, or a platform for connecting third parties,” from two things.
First, it prohibits large technology companies from becoming a financial institution.
Second, it prohibits large technology companies from establishing, maintaining, or operating cryptocurrency. The Board of Governors of the Federal Reserve System would determine what constitutes cryptocurrency and covered technology companies found in violation of either ban would be subject to a fine of up to $1 million per day.
While the intent of the draft legislation is clear—large technology companies must not be involved in cryptocurrency—it is unclear why the size of a technology company makes it more or less fit to operate in the cryptocurrency market. After all, large technology companies employ some of the brightest minds in their industry and their expertise no doubt would be instrumental in solving some of the problems facing cryptocurrency.
Additionally, if the proper standards are adopted and implemented, large technology companies are no more or less vulnerable to cyberattacks or privacy problems. Furthermore, if a large technology company is willing to abide by the same laws and regulations as financial institutions, why should they not be granted the opportunity to compete? It’s generally better for consumers to have more choices, not less.
Finally, if America is going to continue to be a center of technological innovation, Washington should encourage companies, especially those with well-documented commercial success in technology, to advance financial technology, instead of picking winners and losers, and driving such innovation to foreign countries with more favorable regulatory environments.
This way, leaders in Washington can have the best of both worlds: financial technological innovation that directly benefits their constituents and rightsized oversight of it to ensure it meets the standards of the American people.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
Aaron Cutler is a partner in Hogan Lovells’ Washington, D.C., office. In his government relations practice he draws on experience as a former senior House leadership staffer to lobby Congress on a wide variety of topics, including technology and financial services issues, and recently appeared before the House Financial Services Committee as a witness to discuss the future of financial technology.
Kevin Wysocki is a government relations and public affairs specialist based in Hogan Lovells’ Washington, D.C., office. Having worked as policy staff for the House Financial Services Committee and three members of Congress on the committee, Kevin leverages his deep knowledge of the U.S. Government and policy to help clients.