Federal Reserve Chair Jerome Powell said at a recent Congressional hearing that he thinks digital assets are showing sustainability as an asset class in the U.S. Powell made the comment June 21, during his delivery of the Federal Reserve's Semi-Annual Monetary Policy Report to the House Committee on Financial Services.
Rep. Warren Davidson (R-Ohio) said during the hearing that in the U.S., cryptocurrency has a market cap around $1.1 trillion. Davidson asked Powell if he acknowledged that the asset class "has staying power in the U.S. economy?"
"It appears to have some staying power," Powell said, and also that crypto's market cap has decreased over the past year.
Nasdaq defines "staying power" as "The ability of an investor to stay in the market and not to sell out of a position when an investment has fallen in value."
Some lawmakers and industry experts attribute cryptocurrency's market cap decrease to the collapse of crypto exchange FTX, as well as a lack of clear oversight for other exchanges in the U.S.
"It’s had some volatility," Davidson said during the hearing, "in large measure due to the lack of legal clarity."
Davidson said he hopes the committee will be able to help provide that clarity for market participants, as well as for SEC Chair Gary Gensler. Davidson said two bills under consideration, one on stablecoins and another on digital asset market structure, could help in those efforts.
Crypto's market cap was hurt also by the collapse of crypto exchange FTX in November, which rattled the industry, causing the total market cap to drop below $1 trillion, Investopedia reported earlier this year.
Attorney Coy Garrison, a former regulator who is now a partner at Steptoe & Johnson LLP, said that in the wake of FTX's collapse, regulatory agencies are trying to overcompensate by policing the crypto industry, The Trusted Professional reported in February. "There is a political incentive to bring bigger cases post-FTX to be viewed as the responsible cop on the beat,” Garrison is quoted as saying to the Wall Street Journal.
In June, the Securities and Exchange Commission (SEC) announced it had filed 13 charges against crypto exchange Binance. SEC charged Binance, the largest crypto exchange in the world, and its founder Changpeng Zhao "with a variety of securities law violations," the June 5 announcement stated.
"Charges include operating unregistered exchanges, broker-dealers, and clearing agencies;" SEC reported in the announcement, "misrepresenting trading controls and oversight on the Binance.US platform; and the unregistered offer and sale of securities."
Binance responded to the lawsuit in a blog post stating that the company has tried to cooperate and communicate with the SEC, engaging in "extensive good-faith discussions," and is "disheartened" that the SEC has chosen to pursue litigation.
"Unfortunately, the SEC’s refusal to productively engage with us is just another example of the Commission’s misguided and conscious refusal to provide much-needed clarity and guidance to the digital asset industry," the blog post stated.
The SEC on June 6 also filed a lawsuit against Coinbase, the largest crypto exchange in the U.S., charging Coinbase with "operating its crypto asset trading platform as an unregistered national securities exchange, broker, and clearing agency."
Coinbase was also charged with "failing to register the offer and sale of its crypto asset staking-as-a-service program," according to the SEC.
Coinbase CEO Brian Armstrong said in a June 6 tweet that he views the litigation as an opportunity to seek needed regulatory certainty, considering that the SEC and the Commodity Futures Trading Commission (CFTC) "have made conflicting statements and don't even agree on what is a security and what is a commodity."
"Regarding the SEC complaint against us today," Armstrong wrote in the tweet, "we're proud to represent the industry in court to finally get some clarity around crypto rules."
