Crypto Conversations Happening on Capitol Hill
Ric Edelman: One of the big questions I often get from folks is what is the government's attitude about crypto? Is the government supportive? Are they going to help see it get developed or are they going to ban Bitcoin? That's a really common question. So, I'm happy to welcome on to the program Congressman Jim Himes. He is Connecticut's fourth district representative and he's now serving his seventh term in the House of Representatives. Congressman Himes is a member of the House Financial Services Committee and Chair of the Select Committee on Economic Disparity and Fairness and Growth. He also serves on the National Security, International Development and Monetary Policy Subcommittee. Congressman was born in Lima, Peru, grew up fluent in Spanish and English, and he moved to the United States when he was 10 years old. He attended Harvard and as a Rhodes Scholar, attended Oxford University. Before being elected to Congress, Jim Himes was a VP at Goldman Sachs, where he headed the bank's telecom technology group. Congressman, it's great to have you on the program.
Congressman Jim Himes: Thanks for having me, Ric.
Ric Edelman: So, with a background like yours coming from Goldman Sachs, Wall Street and particularly involved in telecom tech, not at all surprised that you have an interest in blockchain and digital assets. Is this a common attitude on Capitol Hill or are you solo in your interest in this subject?
Congressman Himes: No, I'm far from solo. I'll tell you, Ric, you know your question about what's the attitude of the government? That's a hard question to answer because the government is pretty big with a lot of people in it. But I will tell you that most members of Congress are some combination of intrigued by the innovative possibilities that could come out of crypto. And when we say crypto, I mean also blockchain, NFTs, that kind of stuff. They are definitely intrigued by the innovative possibilities, but also a little concerned. We're obviously talking at a time when an awful lot of people have lost a lot of money in a variety of different cryptocurrencies. And so, look, the government will figure out eventually how to do what it should do, which is to regulate what is essentially, at least in a narrow way, a financial market, to make sure that you don't have rampant fraud, to make sure that people who buy and sell cryptocurrencies can have some confidence in who they're dealing with and that kind of stuff. But, you know, I sort of think of it as the way I'm old enough to remember the Internet back in kind of '98, '99 (maybe even earlier - '97, '98). No one really knew what it was going to mean. And there was a lot of crazy stuff. There were all sorts of fly by night ideas and stuff, but obviously it transformed the world that we live in. And I think you know, cryptocurrency may not be quite what the Internet was, but I think there's going to be some pretty interesting things that come out of it.
Advocating for the U.S. to Launch a CBDC
Ric: And one of the most interesting that is most topical these days is a CBDC, a central bank digital currency, the notion of making a digital dollar. There's a lot of conversation about this in Washington. You recently wrote a whitepaper. You strongly advocated for the United States to launch a CBDC, a central bank digital currency. Talk about why you wrote the paper and why you believe that we need a CBDC at this moment.
Congressman Himes: Yes. It helps to sort of start with kind of how actual currency developed. If you could sort of rewind to 200 years ago, you'd have a situation where each state was issuing its own currency. Companies would issue currencies. And eventually the United States and other countries figured out that you had to have one national currency and then that ought to be what people use to make purchases and save money and that kind of thing. By the same token, in the crypto realm, I think it's quite possible that there's going to be a whole bunch of different cryptocurrencies, probably interesting to different groups of people. But there's one thing the government can do, which is to provide a currency that, like a dollar bill, has the backing of the US government and that opens the doors to people who may be skeptical of the banking system. For example, let's imagine the banks start issuing stablecoins. There's obviously a percentage of the American population, often immigrants, that aren't comfortable with banks. So, you can sort of see how a digital representation of the dollars that we carry around or at least used to carry around in our wallets, might be valuable to a subset of people who might not trust otherwise the cryptocurrency world.
Ric: What's the general sentiment on Capitol Hill? Do you find that there's broad support for this notion?
Congressman Himes: Well, I wouldn't say broad support. I would tell you that there's a lot of people intrigued by it. Again, a lot of people say, yeah, that's right. You know, particularly at a time when stablecoins are experiencing some real trouble. We've seen all the incredible volatility and the failure of Terra and questions about what's the reserves on this cryptocurrency. A lot of people have lost a lot of money and there's been a lot of questions raised about privately sponsored stablecoins. Right now, it does feel like one of those moments where people might say, “Wow, if you could have one of these, it was backed by the government, that would mean something.” There are other people who say, “No, look, the government doesn't need to be in the business. Banks and other private entities ought to do it.” So that's still very much a debate where I would tell you there's some consensus that even my Republican friends realize that we've probably got to be smarter about fraud and risk. And if another stablecoin bill is out there saying, 'I've got a dollar for you' to make sure that that in fact is worth a dollar, I think that kind of stuff is sliding right into the into the crosshairs of the Congress right now.
The Role of Congress in the Regulation of Crypto
Ric: One of the comments that I often hear is that there's a lack of regulatory clarity about the crypto space. Are you confident that Congress has their focus on this and that we're going to see legislation over the next year or two that will help clarify some of the questions that the industry has?
Congressman Himes: Yeah, I think because you say year or two, I have some confidence that Congress will move on providing some clarity on things like which regulator gets to oversee a particular cryptocurrency or a particular token. The SEC amongst others, is doing a pretty good job right now of going after fraud. There have been several instances where people have just out and out lied about tokens or cryptocurrencies. And the SEC is doing a pretty good job going after people who are committing fraud. But there's a lot of huge questions about who will regulate: Is it the Securities and Exchange Commission or the Commodities Futures Trading Corporation or the Federal Reserve? In this country, we're either blessed or cursed, depending on how you think about it, with a lot of different financial regulators. And it's not at all clear right now who has responsibility for the safety and soundness and business practices of all these different flavors of cryptocurrencies. And I do think we're going to make some progress in the next year or two on that.
Ric: So, what would you say to ordinary investors? You know, this is basically the bulk of my audience here on this show, folks that are desperately concerned about their own personal financial security and their effort to create and manage wealth and protect the money for their children, as well as caring for aging parents. What advice or commentary would you want to offer our listeners as they express curiosity about crypto? Is this something that... I'll give you the two extremes. Stay absolutely away. It's nothing but a scam and a fraud. The other extreme, it's the greatest investments in sliced bread somewhere in between. What general message would you like to convey?
Congressman Himes: Yeah, that question sort of forces me to put my old banker hat on rather than my member of Congress. Members of Congress have no business whatsoever giving people investment advice. And I'm not going to do that here. I'm going to tell you this - people get hurt because they chase the latest thing. Their buddy down at the bar tells them they should invest in Dogecoin and son of a gun, they cash out the 401(k) and put it in Dogecoin. And the next thing you know, you've lost a lot of money. Successful investors are folks who invest for the long run, who do a lot of research, who are pretty prudent. It's not fun. Look, I know it's fun to day trade. I know it's fun to bounce from cryptocurrency. But the best thing I can tell you, Ric, is these are very high volatility. And in this world, volatility means risk. These are very, very high volatility, new innovative things. And so, hey, look, if you want to put a little bit of money just to sort of play the game, that's one thing. But this is not a moment to be betting the farm, as they say.
Ric: Be measured, be responsible. I think, as General Patton once said, it's okay to take risk. That's different from being rash.
Congressman Himes: Yeah. That's exactly right. I mean, look, think about it. How should people, your average Joe investor out there, think about the stock market, you know? Oh, gosh, my friend told me this... Fine, fine. If you really want to invest in some stock, you don't know a lot about, do it. Just be prepared because you could lose a whole bunch of money. So, if it ain't in a bank account, it's not necessarily risk-free. People just need to remember that.
Ric: That's good advice, as always. Congressman Jim Himes, thank you for being with us today. And if somebody wanted to read your Winning the Future of Money White Paper you just released on the notion of a U.S. CBDC, how would our listeners get a hold of that paper?
Congressman Himes: So, it's available on my official website, which is Himes.House.Gov. If you just search for it on the official site, you'll see it. It's a pretty easy read. We tried to keep it not too technical and yeah, I'd be interested in people's feedback.
Ric: Well, there you go. You can get it at Himes.House.Gov. And I encourage you to learn about this because it's very likely a CBDC is in our future at some point. Congressman Himes, thanks for joining us on the program.
Congressman Jim Himes: Thanks very much, Ric.