Rep. Brad Sherman’s views on cryptocurrencies set him apart from most of his colleagues in Congress. The Northridge-area Democrat is not only suspicious of crypto: he hates it and views it as a threat to the national security of the United States.
Sherman, who chairs a House subcommittee on investor protection, may be the leading crypto skeptic on Capitol Hill.
A growing movement in Congress is looking to bring more regulation to the nearly $2 trillion crypto industry, which is currently overseen by a patchwork of state laws and federal agencies. However, Sherman not only wants to regulate cryptocurrencies, he wants them to be banned.
“I don’t think we can do it [to a ban] shortly,” Sherman told The Times, noting that the crypto industry is a powerful player when it comes to it campaign donations. “Lobbying money and campaign fundraising money works, or people wouldn’t; and that’s why we didn’t ban crypto. We didn’t ban it in the beginning because we didn’t realize it was important, and we haven’t banned it now because there’s too much money and power behind it.”
Like most crypto critics, Sherman worries that individual investors could be scammed. But Sherman also worries that crypto poses a more systemic threat, empowering criminals and human rights abusers, and undermining the US dollar’s dominance. Crypto advocates counter that the same technology can help the persecuted get their money out of authoritarian countries.
Sherman is particularly concerned about services like Tornado Cash, a cryptocurrency mixer operated by the Treasury Department was accused of money laundering over $7 billion since 2019 by taking payments and blending them through other accounts, making them nearly impossible to trace.
Not everyone who uses such services is a criminal. Vitalik Buterin, co-founder of the cryptocurrency Ethereum, approved for use Tornado Cash is donating cryptocurrency in support of the Ukrainian government and praised the platform’s ability to hide supporters’ donations from the Russian government. Many people living under authoritarian regimes sanctioned by the US may have legitimate reasons to evade US sanctions, proponents say.
“For people in places like Iran, Palestine, Cuba or China, Bitcoin isn’t a first [option]it’s their Plan B,” Alex Gladstein, Chief Strategy Officer at the Human Rights Foundation and a prominent Bitcoin defender, The Times said. “I’m sure they’d love to just use the dollar like we do in America. But you know what, her [can’t]. And bitcoin is a really nice thing.”
countries like Argentina and Cuba have seen a surge in Bitcoin usage due to inflation and in the case of Cuba’s tough sanctions, Gladstein said. Above 400 Western Unions closed in Cuba during former President Trump’s administration, making it difficult for Cubans in the US to send money home. So Cubans have turned to apps like Muun Wallet to send and receive money, and some even use bitcoin to pay for everyday necessities, Gladstein added.
“People are caught between hyperinflation, currency devaluation and capital controls on the one hand and US sanctions on the other,” he said. “So they turned to bitcoin because it was remarkably strong against both kinds of evils.”
Many in the crypto industry also point to its use among people of color as evidence that it can serve as an alternative for unbanked communities. Almost 40% of Black Americans under the age of 40 have invested in cryptocurrencies, according to a recent report Charles Schwab and Ariel Investments.
“A disproportionate number of people who received subprime loans were also people of color,” counters Sherman, pointing to the racial disparity in who received robbery loans during the 2008 market crash.
Sherman is torn about how best to protect crypto investors. He doesn’t think people should be scammed in an obvious way, but acknowledged there is little he can do to stop people from spending their money recklessly.
“It’s hard running the Investor Protection Subcommittee in a country where people want to bet on it [meme coins],” he said. “Cryptocurrency is a meme that you invest in hoping you can sell it to someone else before it tanks. That’s the beauty of a Ponzi scheme.”
Without a ban, Sherman believes crypto should be regulated by the Securities and Exchange Commission, the same regulator that oversees stocks, bonds, and other securities. Since 2017, the SEC has initiated just over 80 cryptocurrency-related enforcement actions; and in Canthe agency said it would double the number of enforcement staff in its crypto unit to 50.
Sherman believes that crypto should be regulated by the SEC because of its size, expertise, aggressive enforcement actions, and crypto’s similarity to a stock or security, he said. However, Sherman could be losing ground.
Last month, Sens. Debbie Stabenow (D-MI) and John Boozman (R-AR) a invoice that would define most cryptocurrencies as commodities, not securities, and bring their regulation under the Commodity Futures Trading Commission — the same agency that oversees trading in corn, oil, and meat.
The Stabenow and Boozman bill would require registration of crypto trading platforms — including FTX, Coinbase, and others — with the CFTC. Some of the largest cryptocurrency exchanges are welcoming increased government oversight. Sam Bankman-Fried, the billionaire founder and CEO of FTX, has lobbied politicians to bring regulation under the CFTC. Coinbase, one of the largest exchanges in the US, also told the Times that it supports industry regulation.
The Stabenow and Boozman Act would encourage exchanges and regulators to act more aggressively against “abusive trading practices” such as: The bill would also require platforms to report their users’ demographics and use that data to adjust regulation.
Sherman, Stabenow, Boozman, and top crypto firms all agree that the industry should be regulated. But they disagree on the details — and when trillions of dollars are at stake, details can be worth billions.
Market reform groups like the nonprofit organization Better Markets agree with Sherman that the SEC should take the lead on crypto regulation. Current and former financial regulators have spent the last few months making the announcement Duel in the Wall Street Journal op eds on the subject. And the crypto industry has spent tens of millions of dollars on political donations and lobbying Congress over the past year.
Sherman may have dreams of banning crypto, but right now it’s far from clear that he’ll even win the battle to regulate.
https://www.latimes.com/politics/story/2022-09-04/brad-sherman-leading-crypto-skeptic-congress Congress’ leading crypto skeptic is a Southern California congressman