Crypto CEOs To Testify Before Lawmakers Weighing Greater Regulation – The Wall Street Journal

The CEOs of stablecoin issuer Circle Internet Financial Ltd., crypto exchanges Coinbase Global Inc. and FTX Trading Ltd., bitcoin-mining firm Bitfury Group Ltd., cryptocurrency-payments system Stellar Development Foundation and blockchain firm Paxos Trust Co. are scheduled to testify from 10 a.m. ET.

In a memo announcing the hearing, Democratic staffers from the committee highlighted concerns about investor and consumer protections and market integrity arising from crypto.

The executives are expected to tout the potential upsides of crypto and blockchain technology while playing down the risks. They are also likely to argue that cryptocurrencies don’t fit neatly within the existing structure of U.S. financial regulations and that lawmakers should consider writing tailor-made legislation for their industry.

Crypto supporters say that the technology can facilitate faster and cheaper transactions than traditional payment networks, and that it has the potential to foster innovation and financial inclusion. Policy makers worry that the rapid growth of crypto markets poses a threat to financial stability, that the sector is rife with fraud, and that criminals are using cryptocurrencies to evade taxes and circumvent anti-money-laundering laws.

Oversight of crypto markets is spotty in the U.S., where financial regulation is split among federal and state agencies.

The Securities and Exchange Commission in recent years has shut down dozens of so-called initial coin offerings for selling unregistered securities. Under Chairman Gary Gensler, who was nominated this year by President Biden, the agency has sought to persuade trading and lending platforms, such as Coinbase, to register as securities exchanges.

But the two largest cryptocurrencies by market cap—bitcoin and ethereum—are considered by many experts to be commodities rather than securities, meaning they likely fall outside the SEC’s jurisdiction. While the Commodity Futures Trading Commission regulates derivatives markets for commodities, its authority is more limited when it comes to the underlying instruments.

“There are gaps in our system,” Mr. Gensler said Tuesday at The Wall Street Journal CEO Council Summit.

While congressional hearings are often uncomfortable for corporate figures, at least some of the crypto executives slated to appear Wednesday expressed enthusiasm about the opportunity to testify on Capitol Hill.

Stellar Development Foundation CEO Denelle Dixon said in a Twitter post last week that she is “honored to testify” and thanked Ms. Waters for inviting her.

Bitfury CEO Brian Brooks, who served as acting comptroller of the currency during the Trump administration, recently said on CNBC that he hopes the hearing will help “resolve some of the contradictions in U.S. crypto policy.”

He said he plans to argue that bitcoin mining—which uses vast amounts of electricity and has led to the reopening of some closed fossil-fuel power plants—“can be part of the solution for an environmentally sustainable future.”

Write to Paul Kiernan at [email protected]