With Congress Fixated On Facebook, China Has Taken The Cryptocurrency Lead
Just as the European Union bypassed the United States on data protection, China is poised for the great leap forward on cryptocurrency. Once again Congress is behind the curve on financial technology, craving self-serving media coverage before election season over understanding the trends and technologies shaping America’s financial future. While policymakers may have their grievances with Mark Zuckerberg and Facebook, they must look objectively at cryptocurrencies, including Libra. Regardless of what path Congress decides to take, Americans are counting on Congress to make an accurate assessment of the technology without politicizing it. Moreover, Congress’ continued fixation on Facebook is holding back the innovation of the larger cryptocurrency community.
Cryptocurrency offers digital, mobile, stable, fast, cheap and secure forms of money
Libra is a next generation encrypted digital currency which allows for instantaneous transactions and borderless transfer-of-ownership. The innovation in cryptocurrencies have been driven by various trends such as the expense and inefficiency of traditional financial structures and processes, economies of scale and scope offered by digital information platforms, the demand for greater privacy and security in financial transactions, the demand for better currency from consumers including 1.7 billion “unbanked” people, and the political desire to deliver improved social outcomes by lowering the cost of money and making it more accessible. Facebook suggests that transferring money around the world should be as easy and cheap as sending a text message. It is working with the Libra Association, a membership organization of companies from payments, telecommunications, ecommerce, non-profits, and venture capital to explore launching such a currency next year. Some years ago, Facebook launched a digital currency, Facebook Credits, which generated a virtual form of money from online games. Facebook hoped to turn this into a micropayments system, but disbanded the program likely because of real or perceived threats it presented to powerful established financial institutions.
Congress is behind on yet another technological development
A similar fear is likely driving the treatment of Libra today. Even before holding yesterday’s House Financial Services Committee hearing to form their opinion on Facebook’s Libra, some members of Congress had already wrote to the CEOs of PayPal, MasterCard, Visa, and Stripe pressuring them to back out of the Libra Association, citing “deep concern.” The Financial Services Committee muddied waters further by conflating the already complex and technical issue of cryptocurrency with data privacy, a subject already covered in dozens of hearings in 2019 alone. While many House committees have gerrymandered their jurisdiction to discuss Facebook and privacy, Americans have no other option in the House than Financial Services for legislation on cryptocurrency.
Indeed, Congress is playing catch up on data privacy because it missed its golden opportunity to implement President Obama’s Privacy Bill of Rights in 2012. Europe interpreted American inaction as a dereliction of duty and stepped up to promulgate the General Data Protection Regulation (GDPR), making the EU the de facto data protection pacesetter. Europe’s rules have sweeping ramifications globally and constrain the development of new technologies. Had Congress acted sooner, it may have deterred the Cambridge Analytica debacle. Moreover, it would have secured the global regime to be the American, not European, standard. Sadly, the pattern is playing out again with cryptocurrency. This time the US is playing checkers while the Chinese are playing 3D chess.
China is on track to be world’s cryptocurrency leader
In 2020 China’s central bank will launch a state-backed cryptocurrency and issue it to Alibaba, Tencent, and five other Chinese platforms that compete with Facebook. The offering is expected to disperse renminbi-based cryptocurrency to 1.3 billion Chinese with the expectation that it will filter to consumers in the US. If neither Congress nor the SEC acts now, the US will miss its chance to overtake China for the leadership role. Senator Mike Rounds of South Dakota observed that America’s archaic securities laws are out of touch with modern technology, noting:
As it stands, we have no clear legal way to ascertain whether a cryptocurrency is a security. What legal foundation we do have for these types of questions is rooted in the Securities Act of 1933. That law was written more than half a century before computers and the internet were created, more than two decades before Hawai’i was admitted to the Union, a decade before the jet engine was developed, and in a period of time in which 90 percent of rural America lacked electricity.
Both parties and houses of Congress are finally coming to terms with the economic, financial, technological, and military threats posed by China.
The diverse cryptocurrency community is more than just Libra
Chairwoman Maxine Waters, Ranking Member McHenry, and the rest of their peers on the House Financial Services Committee should recognize what cryptocurrency is and that Libra does not represent or speak for the entire cryptocurrency community. While Libra is in experimental stages, there are dozens of real crypto companies with real employees struggling to operate because of the lack of regulatory clarity. Without the right policy framework, there is little room for growth or innovation because companies fear they will be heavily fined or be deemed illegal.
As the Democrats pride themselves as the party of science of technology, the House Financial Services Committee should be at the cutting edge of cryptocurrency policy stewarding useful legislation to ensure that the US not only experiments, but leads, in cryptocurrency. Instead of squandering media opportunities for yet another beatdown of Mark Zuckerberg, House leadership should use the opportunity of his visit to objectively learn from Libra’s success and failures and to ask Zuckerberg critical questions of cryptocurrency. Voters, who restored Democrats to power in 2018 hoping they would take they high road and advance policy that improves America’s technological position, have this proof point to assess in November 2020.
Author of this article is from Forbes