Hearing Prospects | Law Professor: The United States does not need cryptocurrency, only need to upgrade the system

Today, the US Senate Banking, Housing and Urban Affairs Committee will hold hearings on the regulatory issues of digital currency and blockchain.

Mehrsa Baradaran, a law professor at the University of California, Irvine School of Law, will testify at this hearing. Currently, his testimony has been published.


Baradaran mentioned in his testimony that cryptocurrencies such as Bitcoin and its underlying technology blockchain were born after the 2008 financial crisis, stemming from concerns about inefficiencies, inequalities and some risky behaviors of banks. She acknowledged the existence of these problems and thanked the cryptocurrency for reminding people of the problems in the financial sector, but she did not believe that cryptocurrency was the best choice for solving inclusive financial and financial equality.

“The inequalities and inefficiencies that the bitcoin and cryptocurrency industries are addressing are not technical issues, but policy issues. These issues must be addressed in this room, not in the tech startup's office or anonymous white paper. The Fed’s payment system is critical to full participation in business activities. Every American has the right not only to participate in the economy, but also to participate democratically in monetary policy decisions that affect their lives. We do not need to replace this by replacing the Fed or legal tender. Goals. In fact, our Congress must do the opposite and ensure that our public institutions are fulfilling their mission."

A public payment system open to all Americans

Baradaran believes that the Fed should run a public payment system that is directly oriented to the public. At this stage, only certain banks and their customers can use the Fed's payment system, and banks have standards that the Fed cannot control when selecting customers.

Banks pursuing interests tend to give up groups with low profit output. To make matters worse, the instability of the global economy over the past few decades has led to more and more banks choosing to merge or restructure their businesses, which has further led to an increase in barriers to entry for banking services.

Therefore, in order to solve the problems faced by this group of people, Baradaran proposes to provide a checking account to all communities through the US Postal Service (USPS), which does not need to provide complete banking services, only need to provide trading services, and such accounts can be linked to the central The payment system is connected. Baradaran said that such accounts not only provide all people with reasonable services, but also generate revenue for the Fed and USPS.

In addition, at this stage, many banks are unable to make real-time payments, which adds another layer of time cost to customers. Baradaran suggested that the Fed must upgrade the system to achieve real-time payment clearing. In fact, the Fed has already mentioned this issue in the recent Payment Modernization Act.

Baradaran said that the Fed's payment system is exclusive, not because it lacks professional knowledge or technology, but because it does not prioritize the needs of low-income people.

“This is a problem that can and must be resolved through policy, without the need to outsource it to technology or a banking group.”

Cryptographic currency is not the choice to realize inclusive finance

“So far, financial technology has only served people who already have bank accounts, and the use of blockchain is limited to those who are tech savvy.”

Baradaran is not optimistic about using the blockchain to achieve inclusive finance in the United States, because unlike the less developed countries, the United States has begun to use digital payment systems.

She repeatedly emphasized the technical threshold of blockchain and cryptocurrency, and believed that the premise of achieving inclusive finance was to achieve universal popularity and be user-friendly, but “this is equivalent to moving a mountain”.

Baradaran tends to upgrade the current system compared to recreating a completely new system.

“From a policy perspective, the easiest and most direct way to achieve inclusive finance is to upgrade technology and open the door to our established payment processing system… The payment problem is a policy issue, not a technical one.”

New technologies cannot change financial risks and should not be excluded from regulation

Baradaran acknowledges that technology has completely changed the financial industry, but it has not eliminated the corresponding risks, fraud and other issues.

“This is especially true for Libra, which has been linked to the monopoly of big companies.”

She emphasized that the existence of financial regulation law is meaningful in order to deal with related issues. While some cryptocurrency enthusiasts can understand the idea of ​​resisting regulation, Congress should not make concessions but exercise its own regulatory powers.

“Technology and innovation cannot undermine public policy.”

Bitcoin's monetary theory

Baradaran said Congress and regulators should encourage the development of blockchain companies, but at the same time be alert to cryptocurrencies.

After the financial crisis in 2008, people lost confidence in the banking system and sought to replace the new monetary system of the French currency. This is understandable, but Baradaran stressed that the current banking system is based on legal tender and is worth protecting. The currency is Closely connected to the country.

"Since Nakamoto has published a white paper, the core premise and commitment of cryptocurrency has been to develop a currency that is better than the currency and not bound by the central bank."

Baradaran said that this is a political theory. Although many people compare cryptocurrencies to innovative technologies such as the Internet, social media, and e-mail, this comparison is inaccurate. She said that while blockchain technology is neutral, it can generate significant social and market changes.

“A best-selling book on bitcoin is even showing off: Bitcoin is the enemy of the country.”

Instead, she pointed out:

"The flexibility of the dollar and the ability of the Fed to expand supply are the hallmarks of the US monetary system, not defects, and the result of purposeful institutional design. This is one of the reasons why the dollar has become the most valuable and stable currency in the world."