On Wednesday, a United States House Financial Services Subcommittee on Monetary Policy and Trade hearing provided representatives with an opportunity to learn more about the various issues surrounding the nascent cryptocurrency industry. Committee members heard testimony on issues ranging from digital currency’s potential as a viable currency to its possible impact on the nation’s monetary policy and financial system.
According to reporting from CrowdFund Insider, the hearing’s witnesses offered their own individual perspectives about the technology’s potential. The witnesses included UCSB Professor of Economics Dr. Rodney J. Garratt, Dr. Norbert J. Michel from the Heritage Foundation, Dr. Eswar S. Prasad from the Brookings Institution, and Alex J. Pollock from R Street Institute.
Dr. Garratt highlighted the decline of cash use, as consumers and businesses have continued to adopt electronic forms of payment in recent years. He suggested that the trend would eventually reach a tipping point where banks and merchants might be disinclined to accept physical cash, and that this could result in average consumers turning to non-government-issued digital currencies. Garratt cited that as a reason for central banks to consider issuing their own digital currencies.
Dr. Michel emphasized the need for competition:
“It is certainly difficult to imagine a cryptocurrency replacing the U.S. dollar as long as the Federal Reserve acts as a moderately good steward of the national currency, but it is for this very reason that Congress should eliminate barriers that impede people from using their preferred medium of exchange. Competitive market forces can improve the means of payment in the same way that market forces improve virtually all goods and services, and Congress should not protect the Federal Reserve from those competitive forces.”
Michel also refuted Democrat Brad Sherman’s contention that cryptocurrency is only useful for criminals. The California Congressman said that digital currency accomplishes nothing except to provide a means to facilitate drug activities, tax evasion, and other crimes. He even suggested that it should be banned: ““We should prohibit US persons from buying or mining cryptocurrency … As a medium of exchange cryptocurrency accomplishes nothing.”
Michel disagreed, and urged committee members to support innovation:
“These innovations should be fostered not smothered. The federal government should not step in and tilt the playing field.”
That sentiment was echoed by Garratt, who responded to a question about how Congress should deal with cryptocurrency by observing, “You can’t make something illegal just because someone might use it for illegal purposes.”
Chairman Andy Barr summed up the hearing in a statement issued after its conclusion:
“Today, the subcommittee examined the potential impact of digital currency on the future of our financial system. From its viability as an alternative, to traditional currencies, to its potential adoption by central banks, to its possible impact on monetary policy, it is important Congress carefully study every aspect of this new technology.”