Today U.S. Senate Committee on Banking, Housing, and Urban Affairs was set to hold a hearing on the topic dubbed “Exploring the Cryptocurrency and Blockchain Ecosystem”.
At the opening, the Senior Senator Michael Dean Crapo from Idaho pointed out the main problem. “The Bitcoin has been around for a nearly a decade now”, but has gained a particular attention for the last two years, due to a “meteoric rise and subsequent fall in price” in the last years. The amount of hacker attacks and money laundering cases which involve cryptocurrencies has also risen recently. In February this year Senate Committee heard the representatives of the U.S. SEC and CFTC “to examine their oversight roles of cryptocurrency related products and their activities under their respective jurisdictions”. Since then, regulators tried to adjust and bring standards for the crypto related issues, however, some regulatory and oversights questions like pump&dump schemes or crypto price volatility still remain and raise questions among the Committee members.
Senator Crapo pointed out that blockchain has a potential to improve certain areas such as smart contracts, identity managing, payments and management, and many more which have not been discovered yet. To make sure these areas flourish in a safe and sound way, the Committee needs to understand clearly the opportunities and the challenges for the blockchain system.
Senator Brown took the word after and pointed that this hearing was timed to the 10th anniversary since the world has seen the bitcoin, reminding that blockchain was presented during the world financial crisis.
“Bitcoin and other cryptocurrencies promised to make payments faster and easier and cheaper and to eliminate a reliance and risky financial institutions whose failures, harmed workers and families and all of our communities”, he said.
However, according to Senator Brown, the last ten years have made it obvious that the problems infecting the traditional financial markets for a very long time are also spreading to crypto market.
Despite that, Senator hopes that the new technologies “will help people who are unbanked or undeserved by the traditional financial systems”.
The first witness to provide his testimony was the professor Nouriel Roubini, teaching economics at the Stern School of Business at New York University. Despite being an expert on the global economy, international financial markets, asset and credit bubbles, and their bust, as well as the person who has predicted the Global Financial Crisis of 2007-2009, he is better known as the Dr. Doom in the crypto community. The nickname was coined because of the constant trolling and criticizing the crypto and blockchain technology.
The headline of the testimony dubbed “Crypto is the Mother of All Scams and (Now Busted) Bubbles While Blockchain Is The Most Over-Hyped Technology Ever, No Better than a Spreadsheet/Database” gives an idea who will be the bad cop in the hearing. While crypto-community has learned not to pay any attention to his statements, the U.S. Senate Committee being less knowledgeable with the technology might take it seriously.
Among Roubini’s concerns are:
- Bitcoin’s real use cases are to “facilitate illegal activities such as drug transactions, tax evasion, avoidance of capital controls, or money laundering”;
- The amount of bitcoins that can exist is more than 21 million, because of cryptocurrencies like Bitcoin Cash or Bitcoin Gold that were created after fork of the first crypto;
- “51% attacks are not a theoretic possibility that is impossible in practice. Dozens of successful 51% attacks have occurred recently”;
- “Mining is highly concentrated in oligopolies dominant countries) in shady and nontransparent and insecure jurisdictions — China, Russia, Belarus, Georgia, etc.”;
- “Very few women or minorities are allowed in the blockchain space”;
- “The energy consumption of crypto is an environmental disaster”.
The Committee asked Peter Van Valkenburgh, the director of research and advocacy group Coin Center, as well as a Board Member of Zcash Foundation, to testify against Dr. Doom.
He took his time to explain in a simple way why cryptocurrency is revolutionary, saying “that unlike any other tool for sending money over the internet it works without the need to trust the middleman”.
Among Valkenburh’s points are:
- Bitcoin is the first currency that is available to all and not owned by any single entity;
- Anyone regardless of their nationality, gender, sex, religion, or credit score can use it;
- Bitcoin is not perfect the same as email when it was created;
- The current payment system is not perfect either, it is owned by corporations that are growing bigger and bigger, so their mistakes are becoming crucial as they affect larger numbers of people;
- Private corporations are essential, but no critical infrastructure should rely on one or two;
- Just like the Internet created competition between new media corporations, Blockchain can aggravate competition in IoT and payments systems;
- The technology needs a lighter touch so it will flourish in the U.S.
You can watch the whole hearing here.
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