Republicans on the House Financial Services Committee are turning up the heat on the Biden administration’s oversight of digital assets, this time taking aim at the White House’s Council of Economic Advisers, a key advisory body within the Executive Office of the President, FOX Business has learned.
Rep. Warren Davidson (R-Ohio), Chairman of the Subcommittee on Housing and Insurance, along with Rep. Mike Flood (R-Neb.), who serves on the Subcommittee on Digital Assets has written council chief Jared Bernstein, demanding to know why the office is taking what it described as a "hostile" approach to the digital asset industry.
The Council does not have direct authority over regulating digital assets, but does have the ear of President Biden on many economic issues including the administration’s position on regulating the $1 trillion crypto industry.
Congressional Republicans have increasingly criticized the Biden Administration regulation of crypto including the current crackdown by the Securities and Exchange Commission. GOP house leaders say the SECs recent regulation approach including investigations of exchanges and declarations of digital coins as unregistered securities and thus in violation of law is resulting in both crypto innovation and capital moving offshore.
Proponents of crypto believe digital coins are a future source of value and the underlying technology known as blockchain has the potential to rival the internet in advancing a seamless way to transact business.
But White House officials and SEC chair Gary Gensler say they're attempting to protect investors from an industry that is historically under-regulated and rife with fraud. They point to various industry frauds including the recent implosion of the FTX crypto exchange and the criminal indictment of former industry wunderkind Sam Bankman Fried.
"Today, many entrepreneurs, given the establishment of frameworks in foreign markets, are actively evaluating exiting the U.S. market," the letter states. "Ultimately, if our approach does not change, this posture will continue to push entrepreneurs to establish their businesses outside of the U.S., drawing capital and economic growth away from the U.S. to the benefit of other countries."
Davidson and Flood specifically cite the president’s latest Economic Report, which was released by the CEA in March, pointing out that the language relating to digital assets differs dramatically from prior years, where the council had previously advocated for Congress to play a central role in regulating crypto assets.
The White House wants crypto regulation spearheaded by Gensler’s SEC, which has brought a multitude of enforcement actions against the crypto sector and voicing his beliefs that most digital assets, with the exception of Bitcoin, are securities and should be regulated by the SEC.
He has been quoted as saying most crypto tokens are merely gambling chips in a casino. The CEA’s Economic Report voiced concerns along these lines, stating digital assets "continue to cause risks for financial markets, investors and consumers."
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The letter also calls for responses to five questions including how the CEA believes the industry is expected to navigate regulatory uncertainty, including who and how digital assets should be regulated. It also asks for the council’s rationale on why it believes the FedNow Instant Payment System and a Central Bank Digital Currency (CBDC) could provide a more inclusive financial system than digital assets could. CBDC’s, while acting as a digital dollar, have raised skepticism in the industry due to the potential of government surveillance through spending trends.
Warren and Flood voice concern over the Federal Reserve’s new rapid payment system, Fed Now, and CBDC’s, raising the question as to whether they could have the potential to hurt the crypto ecosystem by promoting a technology that’s heavily regulated and influenced by central banks, thus diminishing the role digital assets play in letting the investing public have control over their money.
FedNow, an instant payment infrastructure that uses automatic payment settlements similar to how digital assets do, have been in the works for many years. However, it was announced in March that it would be rolled out to the public in July. CBDC’s, controversial for their potential to increase government surveillance, are supported by both Chairman of the Federal Reserve Jerome Powell and Treasury Secretary Janet Yellen, although both have stated they are not close to being rolled out.
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"Digital assets are at the heart of our digital economy’s future, but the Biden’s Administration’s response is driving innovators out of America and into the hands of international competitors," Rep. Flood told FOX Business. "We need a regulatory framework that attracts investment here in America and encourages private sector entrepreneurs to deliver digital asset technology here at home."
