During the 116th Congress, a number of events have provided an enormous uptick in the attention paid to the cryptocurrency and blockchain policy area. Starting in the early part of 2019, discussion of Facebook’s profits off of personal data in the U.S. Senate Banking Committee on personal privacy triggered an interest in rumors of a new Facebook cryptocurrency that was to be introduced. As Project Libra provided the possibility of a ‘GlobalCoin’ or world currency, the interest in crypto catapulted as Facebook’s idea sparked issues of consumer protection, safety, and soundness in the banking system, monetary policy, and the status of the U.S. dollar as the world reserve currency.
Between the hearings of David Marcus, the former CEO of PayPalPYPL PYPL and Head of Libra and Calibra (now Novi Financial), and Mark Zuckerberg, CEO of Facebook, Chairwoman Maxine Waters (D-CA) of the Financial Services Committee took a field trip (pre-Covid-19) with fellow House Members to Switzerland and other countries focused on what the ramifications were should such a group of large private firms start creating its own money.
Meanwhile, China seemed to accelerate its vision and ongoing projects toward developing its own central bank digital currency. As Covid-19 sparked not only a pandemic but an economic crisis, the notion of helping people with relief in the form of stimulus checks became popular. With Congress still stinging from the impression in 2008-2009 during the Global Financial Crisis that taxpayer money was used to bail out the very same large financial institutions who caused the crisis, the direction in early 2020 culminated in the CARES Act, which created a taxpayer rebate check of $1,200 for all Americans.
As many did not receive their stimulus check in a timely manner and it seemed the ability to receive a check from the Government was predicated on having a bank account and being a participant in the banking system, the issue of financial inclusion was triggered. Opportunities to create policy measures beyond simply addressing the Covid-19 crisis entered into the grand theatre of American politics, and hearings on Capitol Hill took on two topics at the same time. In the FinTech Task Force, part of the Financial Services Committee, and in the Senate Banking Committee, hearings covered the ideas of ‘digital dollars’ as introduced in Congress under three separate pieces of legislation as well as being initially considered in a draft of the CARES Act.
Soon, the idea of whether the U.S. should develop its own digital dollar in the form of a U.S. central bank digital currency emerged, an idea that has been promoted by the Digital Dollar Project, a new organization in Washington D.C. This idea was met with resistance, however, as ideas of how a concept such as ‘digital dollars’ could be more immediately applied in Covid-19 to help those without bank accounts receive their economic stimulus checks were not clear. And, while the new Digital Dollar Project (DDP) focused on a ‘traditional’ digital dollar, one that would emulate cash and be administered by the Federal Reserve in a current two-tier system, other academics and policymakers were pointing fingers at the Federal Reserve for not stepping up to directly help Americans receive stimulus checks faster.
Questions as to whether the Federal Reserve should act as a retail bank and offer its banking services to those in the United States who are either unbanked or ‘underserved’ came up. The idea of extending the U.S. Postal Service as part of the Fed in delivering banking services to individuals arose, as also did the idea of having fiscal policy reorganized and established within the U.S. Treasury as opposed to the Federal Reserve. Ultimately, these macro-policy issues seemed to bleed their way into the very immediate issue of determining the best way of using technology to distribute the economic stimulus checks for Covid-19 faster.
Meanwhile, for crypto, the ideal of Bitcoin and the limits of 21,000,000 Bitcoins ever being ‘created’ by the software program seemed to clash with the new MMT theory of unlimited printing. The idea of the Federal Reserve printing money non-stop during the crisis already had many in the crypto community pointing out that this was the exact reason why the Fed and the U.S. dollar does not work, but rather a system for global currency like Bitcoin is what is instead needed.
Between a central bank digital currency, a Facebook or group of private firms running their own ‘global’ currency, and the ‘cypherpunk’ programmers creating their own currency via algorithms, the questions of what money actually is and what the correct monetary policy should be has spread beyond the ‘beltway’ of Washington D.C. to blockchain entrepreneurs hoping to reinvent a better financial system. I remember excitement about email and the ‘World Wide Web’ when I was in my early 20s during college. I don’t see this new generation so keenly tuned in to questions about the value of the U.S. dollar and how there may be a better system than the Federal Reserve. Certainly, after graduating into the Financial Crisis of 2008-2009 and then being hit in 2020 by the economic crisis today, there is reason for the younger generations to be skeptical about trusting bankers - whether commercial or Federal - with their money.
With the democratization of information thanks to the World Wide Web, the U.S. has found itself at a crossroads on numerous fronts. First, it still finds itself behind in offering regulatory clarity to crypto and blockchain firms and the idea of innovation flight still leaves the U.S. in a delicate position with China and other countries with respect to this new technology.
Secondly, the very nature of what money is has sparked a conversation that finally caught up with Capitol Hill. Between the efforts of Congress on both blockchain as well as concerns over illicit use of virtual currencies, digital dollars made their appearance as well with the idea of the future of the U.S. dollar as the world’s reserve currency as being at stake.
In the meantime, the Chamber of Digital Commerce is hosting a ‘Crypto Town Hall’ later this week with Congressman Tom Emmer (R-MN), a Co-Chair of the Congressional Blockchain Caucus who had mentioned legislation he was planning to introduce at the House Financial Services hearing when Zuckerberg was testifying.
A soon-to-be released report on all the bills along with a rundown will provide context for the crypto and blockchain industry as to what the issues in Congress have been involved with in 2019-2020, as well as a forecast of what we can expect in the 117th Congress when it comes to crypto, blockchain, stablecoins, and digital dollars.