Crypto CEOs to testify before Congress: What to expect

Yahoo Finance anchors discuss what to expect at the upcoming crypto hearing before Congress with cryptocurrency CEOs.

Video transcript

- So Brian, Julie, a lot of eyes on all things crypto, as they should be ahead of this ahead of this testimony. Brian, I'll start with you. Do you expect this to get really fiery?

- I mean, we were just talking about this with Kai. I think that there has indeed been a kind of a tonal change from this broad members of Congress with regards to the acknowledgment that crypto is inevitable. It's just in what shape, what form is the government going to allow it to take shape, right? I don't think it's necessarily on party lines. I don't think it's as clear as Republicans support less regulation and Democrats support more regulation. I think everyone just has open questions. I think there could be some newsy moments from this beyond any sort of suggestion from the Democrats in the House side of things about whether or not they want to introduce something.

Or just simply a funny bite that ends up getting clipped for YouTube or TikTok because some member of know the House Financial Services Committee can't wrap their head around something very basic around crypto, kind of like when that-- what was it, Richard Blumenthal in the Senate side asking Mark Zuckerberg about exactly how Facebook works. I mean, this is definitely a knowledge gap for Congress. How they reason through that in the next few hours is definitely going to be something to watch. That could be both interesting and maybe a little bit amusing as well.

- Well, and it might be a knowledge gap for most people, right? And even most people who are investing in this stuff perhaps, right? In other words, people understand that this is an asset that this year has gone up. Hopefully, they understand it's a very volatile asset as well. We have seen that more recently, but it's really a hallmark of something like Bitcoin and the other cryptocurrencies. But all of that said, the more research we see, the more we know the people are invested in this stuff. We had some research out from Grayscale earlier in the week that showed the penetration of cryptocurrencies.

And Visa, we just talked to Kai Sheffield just a moment ago, also out with research saying awareness of crypto-- now I don't know exactly how they define awareness-- but they say awareness of crypto is at 94% globally among survey participants with discretion over their household finances. Of those people, nearly one in three of them already own or use cryptocurrency. So sort of to your point, Brian, you know, this is here, it's happening. And so Congress is not going to be able to fight against that part of it, right? So at this point, they're sort of playing catch up with figuring out how to regulate it. As usual, I don't think anything concrete is necessarily going to come out of today. It's more just seeds planted to perhaps water and harvest down the road in terms of regulation.

- Yeah, and I think that we also need to take a look at the composition of the people testifying as well, right? When you take a look at the names that are here, FTX and Coinbase, obviously the way that cryptocurrencies are traded is going to be in focus because of both of those companies being on the stand today as well as Circle. I think stablecoins are going to catch a lot of attention in this space, simply because banking regulators have already flagged this as a potential space. We've already seen that prime money market funds have gotten a lot of steam taken out of them by interests and inflows into these supposedly one-for-one backed currencies that people can use to more easily transact across the world.

Now of course, there's been a lot of questions about the degree to which a USDC or other types of stablecoins are actually as backed as they purport themselves to be. the reserves that they have that are backing that supposed one-to-one pay have been called into question. Whether or not they're using commercial-backed paper or perhaps even Chinese CP in their reserves as well. So this is definitely going to be a big question there.

Of course, when we talk about the CEOs of the cryptocurrencies coming up to the stand, there is no CEO of Bitcoin, there's no CEO of Dogecoin. Obviously, these are all things that have been well explored already. We don't need to talk about the white paper exactly how these cryptocurrencies work. I think these types of derivatives, these types of new products, maybe Web3, Metaverse come up as well. Could be easy for lawmakers to get lost in the sauce, but I think the depth and the width of this hearing is definitely going to be different than perhaps crypto hearings of the past.

- Ryan, no Satoshi? Satoshi is not going to be testifying today?

- No, we haven't found that individual yet. We haven't found him or her, whoever it is. Maybe unless it's you.

- You know-- no, it's not me. But I will say this, though, you know, the lawmakers are likely, I suspect, Brian, really to take these crypto executives to task on potential fraud in the crypto universe.

- Yeah--

- Yeah, but I mean, but fraud is already regulated, is it not? I mean, technically, I don't know.

- Well, ICOs have been pretty well policed-- well, I mean not-- sorry. Not pretty well policed, but they're supposed to be policed by the Securities and Exchange Commission. So a fraud on that front, certainly. But when you talk about fraud in many other ways when it comes to anti-money laundering and you know, Bank Secrecy Act related things, those are all very much outstanding questions that the banking regulators, for example, still have no idea how to deal with.

I mean, again, we were talking about this with Kai Sheffield, we keep coming back to this interview, but the interaction between the financial services world, the crypto world, and then traditional banking is not more clear today than it was, say, a year or two ago. Because there are a lot of banks that are fully willing to want to bank their clients when it comes to having crypto in their portfolio or even offering custody services. But the degree to which they are legally allowed to do so because of the fact that this is an asset that derives a lot of its value in its use case from being an anonymous decentralized type of asset, that's something that they haven't really necessarily been good at clarifying. So until we kind of get to that point-- and that's not something I can imagine Maxine Waters kind of coming in here and saying, here's exactly what our framework is going to be-- and even after this hearing, I don't think there's going to be any clarity on that-- those are going to be the outstanding questions in the medium term that need to get answered.

- And one more thing I want to mention, too, is the level of financial institution participation in crypto now. And it'll be interesting to see-- obviously, the people who are testifying today are crypto industry people. But the financial industry, the traditional financial industry is much more involved in crypto than ever before as well. And Bloomberg was out with an interesting story today saying a survey of those professionals found that they think that crypto is ripe for correction next year. At the same time, they're also planning to put more money to work in it.

So even as this has this reputation of being this sort of upstart decentralized world, the traditional financial world is also very much more involved here and has more riding on it. And also, there has been some speculation over the role that these larger financial institutions have had in the recent sell-off in Bitcoin, because they tend to move more on macro factors. So we'll see how all of this is playing out here as we get this hearing, but also over the next year as we get the price action as well.