Hey folks. There will be a hearing today in 30 minutes and I'm going to live-tweet it for @CoinDesk. You know the drill, thread starts here. Preview: coindesk.com/witnesses-will…
.@BankingGOP Chairman @MikeCrapo says some believe traditional financial payment systems are limited in how broadly they can expand userbase because they require pre-existing bank accounts/cards.
Stablecoins are one alternative created, @MikeCrapo says. "Still, there are legitimate questions about certain stablecoins and digital currencies more broadly, such as the degree of oversight, impact on the transmission of monetary policy and disruption of banks' traditional...
"... financial intermediation," @MikeCrapo says.
Crypto ecosystem is diverse as the rest of financial products, @MikeCrapo says. "It seems to me that these and other similar innovations are inevitable, beneficial and the US should be the lead."
"Big tech companies have made a lot of promises ... and they have not lived up to them," Ranking Member @SherrodBrown says in his opening.
"I'm skeptical financial technology firms will solve them," Ranking Member @SherrodBrown.
"They sold us the idea the technology [tech firms would] unleash would ... democratize industries. They promised us it would build a more just and equal country. Instead" companies just found ways to "pay themselves," @SherrodBrown says.
.@SherrodBrown points to disruption of taxis, journalism, elections as examples of the above
Essential workers are the ones most likely to get sick, @SherrodBrown says, segueing into the current pandemic. "Essential workers are largely women, often people of color, they've been taken advantage of by corporations for decades."
"Big tech has made it easier for corporations to exploit," @SherrodBrown says.
.@giancarloMKTS advocates for a digital dollar in his opening, saying the development of a tokenized version of the US dollar shouldn't be rushed, "but now is the time to get started."
Researchers at the @federalreserve are already thinking about a CBDC, @giancarloMKTS says.
Next step should be a series of pilot programs, @giancarloMKTS says.
"The world is asking what role will America play in the future of money? The choice is we play a leadership role or accept that others will lead," @giancarloMKTS says.
This will improve financial inclusion, @giancarloMKTS says.
.@PaxosGlobal CEO Charles Cascarilla says stablecoins can bring cost savings to both individuals and institutions. "Blockchain allows for dramatic efficiencies."
"Digitizing dollars reduces the gap between" consumers and the Fed, Cascarilla says.
In the wake of federal efforts to quickly deliver benefits, people saw value of the relief funds exceeded by fees, etc, @NakitaCuttino says in her opening.
Calls for open access to the payment often point to risks like financial distress, etc. "These risks are likely to persist even in a digital economy in the absence of open access to real-time payments," @NakitaCuttino says.
.@NakitaCuttino: "In the absence of public policy addressing open access payments and real-time payments, low-income and moderate-income Americans will to continue to have limited resources needed whether by traditional fringe services like payday loans..."
" ... or some novel fringe service," @NakitaCuttino says.
If you're addressing questions with fintech solutions .... there must be a way to bridge the gap between cash to the digital divide," @NakitaCuttino says.
Any solution needs to have low transaction costs. Some cryptos ie bitcoin have high transaction costs, @NakitaCuttino says, and this is one barrier.
.@SenatorRounds is asking if CBDCs work for small transactions.
.@SenatorRounds is asking all the panelists who the winners and losers would be in the immediate rollout of a CBDC.
The current account-based payments system is "slow and exclusionary," @giancarloMKTS says. A new architecture (token-based) could address these issues.
In @giancarloMKTS' view, the winners are those who can benefit from high speed low cost payments, losers would be any businesses who can't adapt.
Cascarilla says it's important to realize technology is ultimately a tool.
Technology is accelerating the process of building a new type of financial system, Cascarilla says.
I think the winners and losers depend, @NakitaCuttino says. "I think regulation could be key in ensuring" minimal losers, pointing to fees.
"How do we protect the most vulnerable," @NakitaCuttino asks.
Senator @jontester asks if the folks who don't have decent internet are just locked out. @NakitaCuttino says she believes so.
.@jontester asks if @giancarloMKTS or Cascarilla have a plan to address this lack of internet access.
"I don't think it's one we can address by looking at digital payments, it's one we need to look at as a nation," @giancarloMKTS says.
"I think what we're talking about here is a way to create a transition system" between cash and digital solutions, Cascarilla says [unsure on the last half of that].
.@jontester is asking if Paxos would obligated to make Montana residents whole given it's regulated by @NYDFS. Cascarilla says his company operates under reciprocal agreements.
.@jontester asks if a national law might make sense; Cascarilla says there would be plusses and minuses. Tester says there need to be more hearings on this subject.
"The US needs a digital dollar," @TomCottonAR says in his opening. "The US dollar has to keep earning that place in the global payments system. It has to be better than bitcoin ... it has to be better than a digital yuan."
Without this, "I worry the dollar will become like the very best flip phone in 2006," @TomCottonAR says.
A CBDC could create an environment where all transactions are recorded to a ledger, but identity is kept anonymous/pseudonymous unless the transactor violates the law, @giancarloMKTS tells Senator @MarkWarner.
The Fed should work with industry to at least understand if there should be dialogue, @NakitaCuttino says.
What we can't do is let the need to make important policy decisions freeze us from moving forward, @giancarloMKTS says.
.@SenJohnKennedy asks what Congress needs to do to have a digital currency. @NakitaCuttino says in terms of financial inclusion, Congress needs to ensure it bridges the gap between access to internet and [Senator cuts her off here, clarifies he means a digital dollar?]
Cascarilla says non payment service provider would need access to the Federal Reserve, meaning fintech firms etc.
.@giancarloMKTS says Congress has to allow/authorize pilot programs to test out different models and check different issues.
.@SenCortezMasto asks if private sector's needed to help inform digitizing of payments (I think).
.@giancarloMKTS says at his time at the @CFTC agency frequently tapped private sector expertise.
.@SenCortezMasto says underbanked individuals need to be brought along, asks @NakitaCuttino asks if the solution is providing everyone a bank account, or providing access to technology to find other sources.
Providing bank accounts would reduce transaction costs, @NakitaCuttino says. Providing technology would be a next step, but it'd be something like providing everyone with a smartphone.
"Those things are needed before we get to the conversations [about giving everyone] access to a digitized marketplace," @NakitaCuttino says.
.@SherrodBrown is back up, asking if offering access to banking system via post offices would help everyone benefit from digital currencies.
.@MehrsaBaradaran has frequently advocated for this btw ^
.@NakitaCuttino says "absolutely," adding "that again goes to the point of bridging the gap between the cash and digital economies."
.@SherrodBrown asks if @giancarloMKTS agrees. The former CFTC Chair says "I don't propose that a CBDC is a panacea ... I propose the architecture not as a full response to financial inclusion, but it's a basis [for] smart solutions."
.@MikeCrapo has one last question to @PaxosGlobal's Cascarilla: "I believe it was in response to @SenJohnKennedy's question that you've indicated that Paxos has a limited purpose trust charter ... my understanding is most exchanges are registered with FinCEN."
.@MikeCrapo asks if MSB registration with FinCEN provides sufficient oversight for stablecoin networks or would a better solution be to create a new federal system?
Cascarilla says he's very proud of Paxos' trust but he's not sure the multi state MTL regime is "an effective mechanism" to regulate stablecoin issuers. "I think having a fintech charter" like the OCC's proposal (h/t @BrianBrooksOCC) is another tool in that kit
And that concludes today's testimony with @SenateBanking /@BankingGOP.
My personal takeaway: Very measured questions, everyone was focused on the questions at hand, and it's almost surprising how accepted this idea of a central bank digital currency has become (1/2)
Not every Senator's on board, but they were talking specifics, not so much in the abstract, which is a serious shift from a year or even a few months ago.
