US Govt. lawmakers failed once again to comprehend the basics of cryptocurrencies as the hearing committee discussed questions regarding future of cryptocurrencies as money.
On July 18th Lawmakers in the United States gathered to discuss cryptocurrencies in a hearing known as ‘Digital Currency: The Future of Money.’ And as the testimonies and questions progressed the whole debate moved towards understanding how Bitcoin or cryptocurrencies could be used as currencies and is there a possibility that they may replace the “dollar” in the future.
Witnesses testify various aspects of digital currency
The hearing began opening comments from the senators that basically revolved around the future of money and how digital currency may feature in it when discussing the future of money. The lawmakers also tried to gauge whether it was required to have a firm understanding of some of the defining characteristics of virtual currencies namely- store of value, a unit of account and medium of exchange. The testimony of each of the witnesses presents gave a different perspective of digital currencies thus trying to cover every possible aspect need to understand the new technology.
The testimony of Rodney J. Garratt, Maxwell C. and Mary Pellish Chair, Professor of Economics, University of California Santa Barbara, spoke about how convenience and speed of electronic transfers have led to a decline worldwide in the use of cash. And with declining cash people may be compelled to use alternative payment systems which either could be cryptocurrencies or digitized currencies issued by central banks.
The next to testify was Norbert J. Michel, Director, Center for Data Analysis, The Heritage Foundation, who spoke about how cryptocurrencies have the potential to transform the financial industry and why cryptocurrency should be embraced as an alternative payment system without much of government interference
Next, Eswar S. Prasad, Senior Fellow, The Brookings Institution commented on the economic impact and implications cryptocurrencies have for the Fed in terms of its monetary policy, objectives of low inflation, high employment and most importantly financial stability if digital currencies become widely prevalent, He also tried to draw distinction between central bank digital currencies which could use the same cryptographic technology and non-official cryptocurrencies.
He was followed by Alex J. Pollock, Distinguished Senior Fellow, R Street Institute, who testified utility related aspects of cryptocurrencies which included used in payments and settlements or used to denominate debt and other enforceable contracts.
The good, bad & ugly of U.S. Congress’ discussion on the “Future of Cryptocurrency” as money
As the lawmakers questioned the witnesses to understand, whether digital currencies were simply a new way to hold and transfer value that will have a limited impact and niche appeal or will it have a far-reaching transformative effect that will change our economy forever, a lot of interesting points came forward.
A lot of the lawmakers did question whether cryptocurrencies had the potential to displace Federal reserve notes or have the capabilities to bring down usage of these notes. The answer to this according to expert witnesses was that the cryptocurrencies were a bad “medium of exchange” and cryptocurrencies that are backed by fiats such as tether are gaining traction as a medium of exchange allowing US dollar maintain its dominant role and position through U.S. institutions and the trust in the Federal Reserve.
What advantages do cryptocurrencies have for common users, other than criminals and tax evaders?
The discussion did put further light on technological vulnerabilities that are potentially out there which are a point of concern for cryptos being accepted as currencies by central banks. To which Dr. Prasad replied that the same vulnerabilities are present with fiats as well where counterfeiting of currency notes is a big issue.
The discussion also included points like the issue that cryptocurrencies offer unparalleled advantages to people who carry out illegal activities, tax evaders, and criminals before moving back to what makes cryptocurrency a currency.
The committee did speak about revisiting this discussion again and asked the members to submit their questions in writing in the next 5 working days.
What do you think about this discussion? Was it convincing enough to steer the US lawmakers towards regulating cryptos? Do let us know your views on the same.