Senators Support Decentralization; Skeptical of DeFi in New Hearing
On July 27th, the United States Senate Committee on Banking, Housing, and Urban Affairs scheduled a hearing focused on cryptocurrency. During the event, a panel of lawmakers from across the political spectrum, and guest speakers in the crypto industry voiced their opinions on the technology, as well as other areas within the blockchain field.
During this hearing, most senators were reluctant to support cryptocurrency, casting doubts on DeFi, but seemed responsive to the concept of decentralization, especially with regards to data storage. Speakers at the hearing showed a significant interest in redistributing data out of the hands of tech giants such as Google, Amazon, and Microsoft.
US Senate Committee on Banking says Crypto is Too Risky
This hearing marks the most recent political and legal discussion on cryptocurrency in the US. The hearing, ominously titled “Cryptocurrencies: What are they good for?” featured a myriad of topics, including the environment, DeFi, and decentralization.
It was led by Sherrod Brown, senator for Ohio, who made it clear from his opening statement that he was anti-crypto. He explained that “[a]ll of these currencies have one thing in common – they’re not real dollars, they’re not backed by the full faith and credit of the United States”, adding that “[t]his technology is almost never used to buy goods and services. Which is what any currency is supposed to be used for, after all”.
However, Sen. Brown also presented a clear understanding of why cryptocurrency is favored by so many people. He accurately noted that:
“Some cryptocurrency supporters see these technologies as a way to take power back from the Wall Street bankers, whose complicated and opaque financial scheming crashed the economy. When the only other option appears to be Wall Street, maybe it’s hard to blame anyone for putting their faith in cryptocurrency. I hear the same message over and over from Ohioans: people don’t trust banks, and they especially don’t trust the biggest banks. They have been burned over and over again by fees, by minimum balances, by waiting periods, by segregated “second chance” accounts. And of course, they all remember the crash, the bailouts, the lack of accountability.”
He is certainly right to identify this as a top priority amongst many crypto fans and enthusiasts. Crypto, and especially Bitcoin, has been known to draw the attention of those who are skeptical of the world’s financial institutions, especially in times of economic crises.
The problem, however, as Sen. Brown saw it, was that traditional institutions are “angling to become the biggest players in these markets”, which is very much true. A report by Fidelity Digital Assets found that almost 80% of institutional investors believed that digital assets should be in investment portfolios.
Trading One System for Another
Sen. Brown’s words echo Senator Elizabeth Warren’s stance on crypto, who also spoke at the hearing. During it, she stated:
“Instead of leaving our financial system at the whims of giant banks, crypto puts the system at the whims of some shadowy, faceless, group of super-coders and miners, which doesn’t sound better to me.”
This argument is a partial strawman. Warren’s sentiment perhaps makes more sense when looking exclusively at CeFi cryptocurrency systems, but in the world of DeFi these problems are not nearly as persistent.
Considering the transparency of a distributed and public ledger, and the fact that it is the norm for developers to build open-source tools, it is hard to argue that the industry is faceless or shadowy. Nevertheless, this argument revealed just how apprehensive the US Government is on cryptocurrency, and on crypto tools overall.
Guest speaker, Angela Walch, Professor at St. Mary’s University School of Law, brought up the possibility of DeFi regulations in the hearing. She explained that so long as there are humans that can still influence and impact these tools (via private keys or logins), those people need to be examined.
She further stated that the government needs to “look for where power exists… and think about how to address it”. The keyword there is power– so long as those keys or backdoors do not exist, then there is unlikely for power to be found, which could be how the future of DeFi is viewed from a regulatory stance.
US Senators in Favor of Decentralization
While Sen. Brown and Sen. Warren took aim at cryptocurrency and DeFi, they were both in support of decentralization as a whole. Both may have been skeptical of how decentralized DeFi actually is, but they were also fans of the idea of financial and technological systems that democratize and distribute resources.
In particular, the use of decentralized data storage was met with warm reception. Marta Belcher, the Chair at Filecoin was invited to be a speaker. She argued that crypto technology can be used to make for a better internet acting as “an alternative to big tech that puts people in control of their own data, protects user privacy and security, and permanently preserves humanity’s most important information”.
This is not the first time decentralized data has been on the minds of government officials. Tim Wu, an antitrust advisor and Special Assistant to the Biden administration, was reported to own over $100,000 in Filecoin (as of June 2021). The notion of decentralized data storage was likely appealing to him because of how monopolized the data industry is by the likes of Amazon, Microsoft, and Google, who collectively own 61% of all cloud storage data.
It is positive to hear the Senate was receptive to the likes of Filecoin, as it shows that decentralization is supported within government. It also sheds light on one of the lesser-discussed industries in blockchain tech. It reveals an important alignment between the blockchain industry and the Senate, which is one of democratizing the internet.
This Senate hearing may not have been fantastic for crypto, but blockchain technology and the decentralization of data took center stage, with both ideas being met with some support. And while many senators voiced concerns about crypto, they seemed to have a better grasp on why exactly people engage in them, which marks a positive sign for any future legislation and committee meetings that will follow.
How important do you think the decentralized data industry will become? Let us know in the comments below.