With the incredible volatility in cryptocurrency markets in recent weeks, lawmakers might be watching the price moves like everyone else, but aren’t likely to act anytime soon, predicts one Representative.
“Most of my colleagues don't have a deep understanding of cryptocurrencies,” Rep. Jim Himes (D., Conn.) said diplomatically in an interview with Yahoo Finance Friday.
“So, for better or for worse, there's not going to be legislation passed out of the United States Congress anytime soon,” he said.
Himes likely has one of the best grasps of the ins and outs of cryptocurrency on Capitol Hill. In addition to being a current member of the House Financial Services committee, the Connecticut Congressman (whose district includes towns like Greenwich, arguably the U.S. hedge fund capital) was a Rhodes Scholar and worked at Goldman Sachs for 12 years. He rose to the head the bank’s telecommunications technology group before entering politics.
Even if his prediction about lawmakers proves true, analysts worry about other forms of government regulation in the nearer term. Federal Reserve Chairman Jerome Powell recently indicated that the Fed may get more involved in the space with a digital dollar. And this week China said it banned financial institutions and payment companies from providing services related to cryptocurrency.
“The latter part of 2021 and early 2022 could be a turning point for cryptocurrencies around the world. Regulators have cryptocurrencies on their agenda as a key priority," wrote Deutsche Bank analyst Marion LaBoure in a recent research note.
‘That's the sort of general atmosphere in the Congress’
Himes says many lawmakers are still at the point of asking whether cryptocurrency is even a good thing.
“What does it actually do? What problem does it solve?” Himes said of the questions his colleagues are asking. “I'm just telling you that that's the sort of general atmosphere in the Congress where people are saying, you know, tell me again, what's good about cryptocurrency?”
Lawmakers in both the House and Senate have raised a host of questions about cryptocurrency in recent months.
During a recent interview, Sen. Elizabeth Warren (D., Mass.) asked whether bitcoin takes advantage of smaller investors, whether they are too easy to steal, and added “I think there's a real issue about the environmental impact” of cryptocurrency mining.
Himes suggested that the legislative response to cryptocurrency volatility for now could be similar to the response to recent GameStop speculation, which led to Congressional hearings but little concrete action.
“It is very clear to me that there's a lot of people out there who believe that trees grow to the sky and will get a very expensive education in what the downside of volatility looks like,” says Himes.
Ben Werschkul is a writer and producer for Yahoo Finance in Washington, DC.