French Hill digs in on cryptocurrency

U.S. Rep. French Hill, Republican from Little Rock, is the chair of the new House Subcommittee on Digital Assets, Financial Technology, and Inclusion, which means he’s tasked with trying to figure out how or to what degree Congress should regulate cryptocurrency.

From Forbes:

Hill says he is looking forward to the challenge, and he actually sees the collapses of crypto giants such as FTX, Genesis Digital Trading, and BlockFi as an accelerant to the work that he is planning. These bankruptcies have also “galvanized more members of Congress in both the Senate and the House to recognize that we need to develop this regulatory framework,” he says.

One of his first priorities is going to be stablecoins, building on what he calls a very “cooperative effort last summer and early fall between House Democrats, House Republicans and the Biden administration, in thinking through the right approach.” Although the term may sound innocuous, stablecoins have become a $100 billion business of privatized digital dollars built on blockchains that have opened up a Pandora’s Box of regulatory questions, such as whether they should be considered securities, how their operations and collateral can be overseen and whether can they co-exist with potential government-issued digital assets.

As an investor, I have zero interest in any form of cryptocurrency. But I find it fairly fascinating to read about, and I highly recommend Bloomberg columnist Matt Levine’s daily email “Money Stuff.” He wrote a whole Bloomberg issue’s worth of a story explaining how crypto works last year.

He helpfully explained stablecoins and the debate surrounding them yesterday:

The standard way that a stablecoin works is:

1. There is some crypto entity, the stablecoin issuer.
2. Regular people give it their dollars.
3. It gives them back a stablecoin, a crypto receipt saying “we owe you one dollar” that can be used as a dollar on some crypto blockchain.

Is that a security? I actually think the answer is no; that to me reads like it is not “the investment of money in a common enterprise with a reasonable expectation of profits to be derived from the efforts of others.” (There is no expectation of profit.) But that is just my opinion, and this is close enough to being a money-market mutual fund (a security!) that a lot of people think the answer is yes.