WASHINGTON — To date, Sen. Tim Scott — the newly-established ranking member of the Senate Banking Committee — has kept his views on the regulation of cryptocurrency largely to himself.
That changed during a Tuesday hearing in the Senate Banking Committee on crypto, where Scott made more substantial nods to the consumer protection pitfalls of crypto than his predecessor, former Sen. Pat Toomey, R-Pa., but still came down critically on Securities and Exchange Commission Chairman Gary Gensler for what Scott said was his disdain toward the industry.
"Let's be clear, had the SEC provided anything but hostility to the crypto industry, we may have been able to save investors from losing billions of dollars from FTX, Celsius, BlockFi, the list goes on," Scott said.
Scott called on Gensler to appear before the Senate Banking Committee.
"Unfortunately our regulators have muddied the waters," Scott said. "We've been told everything from 'we need legislation, to more recently, regulators have the tools they need to supervise this industry. That is quite a flip flop."
Other leaders on the financial services Congressional committees have made it clear where they stand on crypto. Banking committee chair Sherrod Brown, D-Ohio, is a vocal critic of cryptocurrency, while Reps. Patrick McHenry, R-N.C., who chairs the House Financial Services Committee, and Maxine Waters, D-Calif., the House panel's ranking member, are working together on a stablecoin bill and have outlined their positions quite clearly.
"While crypto contagion didn't infect the broader financial system, we saw glimpses of the damage it could have done if crypto migrated into the banking system," Brown said at a Tuesday hearing on cryptocurrency. "And the handful of banks with close ties to the crypto industry have needed liquidity lifelines after they suffered large withdrawals."
But Scott's views on what to do about crypto is the last significant unknown in the Congressional leadership puzzle, and perhaps instructive of how possible it will be for this Congress to develop a legislative framework for regulating the industry. Scott has focused on other issues like housing in his previous Senate Banking Committee work, developing a unique Republican brand of economic populism on financial issues that he could
Scott alluded to the need for enhanced financial education and more plain language when it comes to terms and services for digital assets, as well as more easily accessible information about cryptocurrency in general.
"Disclosure sounds great until you try to read a prospectus," Scott said.
Although Scott emphasized consumer protection, he still held to the now-common refrain from his Republican counterparts, especially McHenry in the House, that too much regulation would stifle innovation. Still, he signaled that he would be willing to work with other lawmakers in crypto legislation.
"Our aim should be to provide rules of the road that are clear, consistent and most importantly, foster an environment that rewards opportunity while ensuring that consumers are informed and protected against fraud and deception," he said.
Outside of Scott's comments, lawmakers questioned expert witnesses on cryptocurrency's connections to the traditional banking system, and how that has been regulated in the past.
Sen. Chris Van Hollen, D-Md., asked about a proposal for a "Glass-Steagall 2.0," that would separate banking entirely from crypto activities. He said that there's a case for the United States to "gold-plate" standards around cryptocurrency and banking, or set regulatory standards that exceed international standards, which can influence other countries to agree to those stronger standards.
"If crypto had been more integrated in the banking system, the fallout of FTX would have been much worse," Van Hollen said.
