Thread by @molly0xFFF

Starting in 30 minutes: a Senate hearing titled "Crypto Crash: Why Financial System Safeguards are Needed for Digital Assets".

Livestream at banking.senate.gov/hearings/crypt…

#SenateHearing

Witnesses will be:
• @leereiners (policy director at the Duke Financial Economics Center, crypto skeptic)
• @LindaJeng1 (crypto lobbyist)
• Yesha Yadav (law prof at Vanderbilt, pro-crypto, big on crypto self-regulation)

Written testimonies linked here: banking.senate.gov/hearings/crypt…

Sen. Brown (D-OH) apologizes for delay, says they were held up at a briefing about spy balloons. 🎈 Starts out with a fairly scathing remarks, as to be expected from historically skeptical Sen. Brown.

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Sen. Scott (R-SC) starts out by requesting that SEC Chair Gary Gensler be called to testify in front of the committee. Begins a testimony that speaks about how innovation needs protecting, blames SEC for FTX collapse, Terra/Luna, Celsius, Voyager, BlockFi, etc.

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Reiners (@leereiners) begins by refuting the claims that "it's still early", and speaks of the "dire harm that cryptocurrency inflicts throughout our society".

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Points to losses through hacks and scams, national security threats, ransomware impact on infrastructure, and climate impact. "What benefits do we have to show for these costs?"

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Reiners urges Congress to recognize cryptocurrencies as security and give SEC full jurisdiction over the crypto industry. Argues that SEC has more resources, and critically, has a consumer protection mandate.

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On to @LindaJeng1. "Technological innovation enhances people's lives in meaningful ways", says Jeng, shortly after Reiners said that we need to realize that "technological innovation" is not inherently a good thing.

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Jeng urges Congress to "establish a federal regulatory framework for digital assets, addressing securities and non-securities". Argues that there's a risk that strong regulation could push crypto companies offshore and weaken US financial dominance.

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Yesha Yadav is up now. Yadav says that the crypto collapse in 2022 should be taken as an indictment of the failed crypto companies but also of regulators.

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Begins her argument for a "self-regulatory regime", where crypto companies should be the ones to oversee the space.

😂 god help us

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She specifically calls out serious flaws in her proposed plan, which she acknowledges exist in self-regulation in traditional finance also, but says that it's needed to get the industry up and running quickly.

[screaming]

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Reiners says that the crypto industry's criticism of "regulation by enforcement" by the SEC is simply a deflection from the industry's repeated and widespread choice to operate in contradiction to SEC regulations.

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Sen. Scott (R-SC) is up now. Continues to denigrate US regulators for "muddying the waters", repeats that he wants to get SEC Chair Gensler in front of congress before his scheduled hearing in September.

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Sen. Scott: "Let's be clear: had the SEC provided anything besides hostility to the crypto industry, we may have been able to save investors from losing billions of dollars on FTX, Celsius, BlockFi, and the list goes on."

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Reiners says he agrees with Gensler that most cryptos are securities, but that some (like Bitcoin) are "sufficiently decentralized" to the point that they're more like commodities, which splinters the regulatory environment.

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He argues that to address that, Congress should carve out cryptos to be placed under SEC jurisdiction to provide a unified regulator.

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Sen. Menendez (D-NJ) asks if the US is ahead or behind the curve compared to other countries' crypto regulation.

Yadav says behind, praises EU's proposped MiCA legislation.

Jeng praises other countries' approaches to not only crypto regulation but data privacy.

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Reiners says he doesn't think the US is falling behind, argues it is better to get regulation right than to prioritize "not falling behind".

Says a lot of countries are jumping to embrace crypto, including countries like The Bahamas that were burned by it.

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Hoo boy, Sen. Vance (R-OH) — crypto booster and holder — is up now. He says he owns crypto, then goes on to say "we don't really know what [crypto] is yet".

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Vance pulls out the ol' argument about "isn't this like the dawn of the Internet?"

Reiners asks why it's taken fourteen years for value to emerge. Says that most people buying crypto are simply looking to speculate.

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Linda Jeng is not covering herself in glory here... I'm having a really hard time following her train of thought as she bounces from topic to topic.

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Yadav cites two examples of "innovation for as long as we can remember in this economy": ATMs and "all of the financial engineering that we saw pre-crisis".

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Sen. Van Hollen (D-MD) asks about thoughts on @ProfHilaryAllen's testimony in a previous hearing, where she urged for a sort of "Glass–Steagall 2.0" for crypto.

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@ProfHilaryAllen Reiners calls for transparency from banks to customers as to their crypto exposure.

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@ProfHilaryAllen Reiners cites the recent Silvergate crypto bank run, a bank that likely only survived because of emergency liquidity from the Federal Home Loan Bank of San Francisco.

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@ProfHilaryAllen Reiners: "[This] of course is not the reason we have federal home loan banks. They exist to support home ownership, not to bail out banks that gamble on crypto".

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Sen. Britt (R-AL) and Jeng are arguing that crypto will allow "more people in the US to achieve the American dream", they pull out stats on adoption of crypto by people of color, women.

#SenateHearing #PredatoryInclusion

Reiners: "There is no evidence whatsoever to suggest that crypto promotes financial inclusion. In fact, there is overwhelming evidence to suggest the exact opposite is happening. Most people who've invested in cryptocurrency have lost money..." 1/3

Reiners: "... Of those people, a plurality are minorities and low-income Americans. This is an example of predatory inclusion. ..." 2/3

Reiners: "... We saw the same thing with subprime loans leading up to the 2008 financial crisis, where low-income and minority communities are being explicitly targeted with very, very risky products. And unfortunately they have lost, in many cases, everything." 3/3

I love how various pro-crypto Senators are simultaneously arguing that Gensler hasn't done enough and that he has been "going too fast".

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Sen. Tillis (R-NC) tries to argue for proof-of-reserves, Reiners shuts him down by saying that POR "aren't worth the paper they're written on", and what we need are *audits*.

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Sen. Warren (D-MA), as to be expected, starts out with a statement about crypto enabling crime, terrorism, ransomware, etc. focuses on the use of crypto for money laundering.

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Warren: "If they couldn't use crypto, would ransomware gangs even exist?"
Reiners: "No."

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Warren compares the crypto industry's claims that regulation would squash innovation to the protestations of banks to the institution of the Bank Secrecy Act in the 1970s.

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Warren: "Should Congress be in the business of providing loopholes for money laundering?"

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Sen. Hagerty (R-TN) wants to provide a "safe" environment for crypto to "flourish" in the US, doesn't want to squash "innovation" and threaten US economic dominance.

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Jeng argues that crypto needs access to banking, because if not they will go offshore or to shadow banks.

Sen. Hagerty: "Just like Binance, and Binance will laugh all the way to the bank."

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And with that, a very abrupt end since they were running over time.

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To clarify, this was Tim Scott (R-SC) not Rick Scott.