Thread by @jchervinsky

0/ The US Senate Banking Committee held a #CryptoCongress hearing this morning entitled "Exploring the Cryptocurrency and Blockchain Ecosystem."

I went & watched live. Here are my thoughts.

Thread.

1/ Let's start with the witnesses: a head-to-head between Peter Van Valkenburgh for the bulls (@valkenburgh) & Nouriel Roubini for the bears (@nouriel).

Both submitted written testimony before the hearing:

- Peter (banking.senate.gov/download/van-v…)
- Nouriel (banking.senate.gov/download/roubi…)

2/ I thought Peter turned in solid work. He wrote a clear & detailed primer on what crypto is & why it matters in practical, hype-free terms.

Nouriel's work didn't impress. I admit I'm biased in Peter's favor, but it seemed like Nouriel just wanted to scream "get off my lawn!"

3/ In general, I'm glad to consider & discuss reasonable critiques of crypto. I agree the industry is young & many issues need sorting out.

But some of Nouriel's points seemed disingenuous to me. He appears to settle for straw man attacks & refuses to engage with the real tech.

4/ For example, in his written testimony, Nouriel says bitcoin fees are $55. That's just wrong. He says crypto can't scale, but ignores layer 2 solutions. He says 51% attacks are frequent & easy, but provides no support.

It's hard to have a productive conversation on this basis.

5/ As for live questioning, I thought Peter did a great job.

His opening statement was among the best articulations of the case for bitcoin I've heard (for a non-anarchist audience, anyway). He spoke directly to the senators' concerns & effectively deployed real-world examples.

6/ I felt differently about Nouriel's performance. You're shocked, I know. I won't waste your time addressing all his arguments, but a few I can't let go.

He repeatedly said companies will never use public, decentralized blockchains. Right. They said that about the internet too.

7/ He said crypto is no better than WeChat & AliPay. Even though both of those are tools of a totalitarian state.

He said @VitalikButerin's trilemma means crypto will never scale. Nevermind that Vitalik corrected him on this *literally* yesterday.

Ugh!

https://twitter.com/VitalikButerin/status/1050117973543858176

8/ Okay, let's move on to what matters: the senators. My impression was they made some progress since the last crypto hearing, but not much.

Most are still trying to understand the basics. Some are interested & see the potential benefits. A few are skeptical or just don't care.

9/ That said, none of them were openly hostile to crypto like other politicians have been before. None called for a total ban, at least.

In fact, none of them called for anything in particular. They seem pretty far away from passing any significant crypto-specific legislation.

10/ It remains fascinating to see how non-partisan these hearings are.

It's rare not know what a politician will say about an issue based solely on the D or R next to their names. It's also an opportunity to build support for crypto before the toxicity of US politics takes over.

11/ The senators' questions included several old tropes.

For example, Sen. Kennedy basically said "forget bitcoin, tell me about *blockchain!*" And Sen. Cortez Masto said blockchain is a gamechanger for energy.

Yea, we'll be stuck with "blockchain, not bitcoin" for a long time.

12/ Many senators also asked about crypto's use by criminals. Sen. Jones, a former prosecutor, was especially interested in that issue.

I loved Peter's response: criminals are always early adopters & if they're *not* using your tech, it's likely worthless from the start.

13/ To give credit where it's due, Sen. Toomey had good & meaningful questions about how the tech works. He asked if bitcoin can scale past five tx/s & whether "mining oligopolies" matter. It seemed like he gets it.

This is the quality of discussion we need to see from Congress.

14/ Similarly, Sen. Warren acknowledged the benefits that crypto offers consumers. That's progress, even if she was still mostly skeptical.

I can imagine her supporting some of crypto's goals one day, like disrupting megabanks & rent-seeking financial services companies.

15/ There were only two things that sounded genuinely bad to me.

First was Peter's answer on how to stabilize the markets. He said the key is to bring in more institutional investors by standing up traditional financial infrastructure like custodians, funds, derivatives, etc.

16/ That's a strong answer in a sense. It likely satisfied the senators, who are comfortable with financial products & services like these.

But what's the point of building a trustless, permissionless crypto if we're just going to hand it back to the same old intermediaries?

17/ Also, most crypto is useful because it's programmable. If you wrap it in a legacy financial instrument, it loses some capabilities. I don't think Lightning supports ETF shares.

I'm not saying I dislike ETFs. I just wonder if Congress will actually support programmable money.

18/ Second (and more troubling) was Peter's answer about law enforcement.

He said bitcoin doesn't help criminals because the blockchain is public & every transaction can be tracked. He said there isn't really such thing as anonymity so the senators shouldn't worry about crime.

19/ I understand that's what the senators wanted to hear, and maybe it's technically true at this moment.

But there's no doubt privacy is coming to bitcoin soon. It's already here for coins like Monero & many people think it's crucial. What would the senators think about that?

20/ This is my biggest concern by far when it comes to US regulation.

Politicians don't seem to know that crypto could defeat government-based financial surveillance. Peter decided (perhaps correctly) not to tell them today, but I doubt they'll be happy when they find out.

21/ To wrap up: I think Peter did a great job arguing for crypto, Nouriel was Nouriel, and the senators showed slight but real progress in their thinking.

For now though, Congress seems happy to stay out of the way & leave the agencies (SEC, CFTC, etc.) in charge of crypto.