This past week, the Senate Banking Committee held a hearing to discuss the topic of digital assets. As should be abundantly clear by now, support, or lack of support, is now largely falling along party lines. Both sides desire consumer protection and understand the need to safeguard against any system risk but the Democrats are largely looking to curtail most activity, while Republicans understand that innovation and change can be difficult – and can take some time.
During the opening statements at the hearing, Senator Tim Scott, the ranking Republican member from South Carolina, expressed his desire for a thoughtful and balanced approach toward digital assets. He also noted the glaring absence of SEC Chair Gary Gensler – who has been vocal about his belief that all digital assets are securities (minus Bitcoin). His testimony would have been beneficial to the hearing, but leadership, once again, protected Chair Gensler from having to answer pointed questions.
Senator Scott noted that the “free market economy was formed by financial innovation,” and this is what continues to drive the economy today.
“Innovation can increase access to traditional financial services and may foster new, emergent technologies that promote financial independence, access to credit, and capital formation. We all know and understand how technology can improve our daily lives, from using our phones to open a bank account to opening a digital marketplace. If we foreclose financial innovation, we limit future generations from growth and opportunity,” stated Senator Scott.”
Scott was critical of the obtuse manner in which the SEC handled the collapse of FTX. On the one hand, the SEC says FTX must adhere to existing regulations, but at the same time, regulators were absent before the firm failed.
“The American people deserve to know why no action was taken prior to FTX’s collapse and how millions of dollars of Americans’ hard-earned money just vanished into nothing. And it was not just FTX. If the SEC had provided even the slightest bit of guidance, I wonder if we could have protected more investors from the collapses of Terra and Luna in May, Celsius in June, Voyager in July, and BlockFi in November.”
Scott said that firms that harm consumers must be held accountable, but it is the responsibility of policymakers to pursue an approach that “protects consumers and promotes innovation and opportunity.”
Senator Scott added that, unfortunately, regulators have been focusing their energy on “misplaced … progressive social issues.”