The U.S. House Committee on Agriculture held a hearing on July 18, 2018 to discuss cryptocurrencies and digital assets. According to the opening statement, the hearing’s goal was to help the committee and community understand what cryptocurrencies are while exploring the regulatory challenges and uncertainties that currently face this industry.
As reported by Vice News, the House Agriculture Committee is responsible for overseeing commodities which in the past were focused on agricultural and mining products. Today, however, commodities encompass many different things, and there is an ongoing debate as to whether virtual products like cryptocurrencies should be defined as commodities. The House Agriculture Committee, therefore, thought it was an important topic to raise for discussion and debate.
Cryptocurrencies are a special case because they are not physical products, but they have value and are traded back and forth very often on a global scale. Vice News noted that, while the goal is for the committee to eventually discuss complex issues surrounding the cryptocurrency industry, in the earlier days, it’s a significant milestone to even touch upon the subject and question what potential impact they may have on the future.
Clear Regulation is a Strong Requirement for the Cryptocurrency Industry
Committee Chairman K. Michael Conaway, in an interview with Scott Kuper, the Managing Partner of Silicon Valley-based venture capital firm Andreessen Horowitz, mentioned that at first, he was “just looking for an education. The overarching question would be securities, commodities, where’s the line? And the other idea is that… if we don’t have to regulate something we really shouldn’t.”
Chairman Conaway is aware that his committee may one day need to regulate cryptocurrencies like Bitcoin, but he noted in his opening statement that cryptocurrencies are a fast emerging industry that has a lot of promise and potential.
“For the first time, we have a tool that enables individuals to reliably exchange value in the digital realm, without an intermediary,” said Conaway. “We can have assets that exist – and can be created, exchanged, and consumed – in digital form.”
Conaway added that blockchain technology and cryptocurrencies could fundamentally change the ways humans interact with each other. He looked at the emerging technology with a positive sentiment, noting that cryptocurrencies have the potential to provide large benefits to society if given the opportunity and space to grow.
Conaway, however, added that having clear regulations was a strong requirement. He understood that in order to regulate cryptocurrencies, we need to raise questions, especially those related to the existing legal framework. He questioned how laws should interact with this emerging technology and what the the issuance, trade, and utilization of cryptocurrencies could look like.
One of his greatest concerns is defining and categorizing cryptocurrencies. In the past, things would generally fall into clear categories. These included securities that would follow security laws or commodities which would follow the Commodity Exchange Act.
But what laws do cryptocurrencies fall under?
The Current Legal Framework May Be Too Static for the Cryptocurrency Industry
While these laws are useful, Conaway questioned whether the current laws can be applied to cryptocurrencies. He finds that perhaps categorizing them into a system that currently exists may be too static.
“If it’s necessary, Congress and regulators may want to consider developing a new framework that takes into account the diverse characteristics and unique economic relationships embedded in the many types of digital assets that can be represented by tokens,” said Conaway.
Conaway’s goal is to ensure that the public is protected from scams and frauds while also ensuring that innovation is not being stunted by strict rules. It is a hard balance that many other countries are testing as well, as it will likely have a big impact on a nation’s competitiveness in the global landscape.
“How we regulate these products and those who develop them won’t determine if they are developed and used, but it will determine if they are developed and used in our country,” said Conaway.
The Committee on Agriculture will therefore be highly involved in the conversation when it comes to regulations and cryptocurrencies. They have a strong interest in what a security is defined as, because it has a direct relationship with commodities. Conaway emphasized that proper regulation, however, does not necessarily equate to “intrusive regulation.” He noted that regulation has to be appropriate to the type of activity and parties involved. Yet he also commented that it could even mean no regulation in certain circumstances as well.