Why Brad Sherman Wants to Ban Cryptos in the US

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U.S Congressman Brad Sherman has once again hit news headlines, this time due to his call for a total ban on cryptocurrency buying.

He has also called for the US to ban its citizens from engaging in mining, saying “We should prohibit U.S. persons from buying or mining cryptocurrencies.” 

He made his comments during a subcommittee hearing on Wednesday. Sherman’s gave the controversial remarks at the subcommittee for the House of Representatives Financial Services Committee.

He claimed, not for the first time, that other than crypto being used by criminals and potential tax evaders, it could also be used by rogue states that sought to bypass sanctions by the US government.

The lawmaker isn’t a stranger to such highly virulent remarks about cryptocurrency and initial coin offerings (ICO).

In March, Rep. Sherman (D-CA), referred to Bitcoin as a “crock”. The remarks were made during a hearing by the House Capital Markets, Securities, and Investment Subcommittee on cryptocurrencies and Initial Coin Offerings (ICOs).

At the hearing, the lawmaker had come out as very ignorant of the value of cryptocurrencies, saying that Bitcoin was only “popular with guys who want to sit in their pajamas and tell their wives they’re going to be millionaires.

His remarks at that time also seemed to suggest that Bitcoin didn’t add any value to the country’s economy.

He had been quoted as asking “when you buy a Bitcoin, are you helping build a new factory?”

On April 26, during a House committee hearing at the US House of Representatives, the US Securities and Exchange Commission (SEC)’s plan to adopt a “balanced approach” in regulating ICOs was hotly opposed by Sherman.

House Financial Services Committee members hotly disagreed over whether a “balanced approach” could be taken in regulating Initial Coin Offerings (ICOs).

During the hearing, dubbed “Oversight of the SEC’s Division of Corporation Finance”, a senior member of SEC William Hinman, told the Financial Services Committee that the commission was “striving for a balanced approach and one that ensures capital formation while maintaining a strong focus on investor protection.”

Sherman, however, disagreed with the SEC’s approach, eventually wondering why ICOs hadn’t been “stopped,” completely.

In his opinion, the “balance” idea would only have a negative effect on the economy, stating that:

“When you strike a balance between those who are trying to create a new currency to facilitate drugs, tax evasion, to deprive the Fed of its ability to market our securities and return 100 bln dollars or so to the US Treasury, all the balances are for total investor protection, which could be achieved by totally banning ICOs.”

The seeming recklessness with which the politician is uttering these statements reminds many of Ted Stevens- then US Senator (R-Alaska).

He had referred to the Internet as “a series of tubes”, a remark that has repeatedly been ridiculed as an unfortunate marker of an inadequate understanding of certain subjects.

Question marks

It’s quite telling that Sherman wants a blanket ban on cryptocurrencies and initial coin offerings (ICOs).

It has been noted that he received the largest portions of his campaign donations from sectors that could be disrupted most by increasing adoption and use of digital assets like Bitcoin.

According to data at the Center for Responsible Politics, Sherman accepted a contribution of $12,500 from Allied Wallet.

Allied Wallet is an e-commerce payment processor that could face stiff competition from crypto-based start-ups.

Sherman’s focus on Bitcoin as a possible criminal vehicle was also questioned when it occurred that the same Allied Wallet had to forfeit $13.3 million in 2010 as a settlement to the Justice Department.

This followed allegations that the company had handled payments that were linked to several illegal offshore gambling sites.

Total ban opposed

Just on previous occasions, not everyone agrees with the lawmaker’s arguments.

Norbert Michel, a panelist representing the Center for Data Analysis countered and disagreed with Sherman’s remarks.

One particular flashpoint was the notion that Bitcoin and other crypto is used by criminals and therefore should be the basis upon which to ban all cryptocurrencies.

The panelist told the committee that:

“Yes it is true that criminals have used bitcoin, but it’s also true that criminals have used airplanes, computers, and automobiles. We shouldn’t criminalize any of those instruments simply because criminals used them.”

According to him, such display of total lack of understanding is what forms the biggest hindrance to acceptability and widespread adoption of crypto in the U.S.

At the same time, Rep. Tom Emmer (R-MN) called for Congress to encourage and celebrate cryptocurrency instead of striving to police it.

Another member, Rep. David Scott also urged the authorities to adopt a more streamlined approach that didn’t focus too much on the stringent regulation of the nascent crypto industry.

Central Bank Digital Currency (CBDCs) a bad idea

At the same time as Sherman called for the ban on crypto buying and mining, the U.S. Congressional subcommittee on Monetary Policy and Trade held a discussion on pertinent issues around digital currencies.

The committee focused on possible local and global adoption of cryptocurrencies.

The members talked about cryptocurrency and blockchain, dwelling on the issue of whether it was prudent for central banks to introduce a Central Bank Digital Currency (CBDC).

Although a lot was considered during the hearing, with a focus on general aspects of monetary policy, certain areas that touched on cryptocurrency faced a lot of opposition.

The general feeling was that the idea of a CBDC would actually be the worst financial idea if adopted.

According to Alex Pollock, a senior fellow at the R Street Institute, the idea of a CBDC was possible, but one that could pose some risks, especially in relation to credit allocation.

He said that:

“I think we can we can safely predict that its credit allocation would unavoidably be highly politicized and the taxpayers would be on the hook for its credit losses. The risk would be directly in the central bank.”

While the overriding notion is that CBDCs would be a bad idea, positive comments were made with regard to greater good cryptocurrencies can achieve.

For instance, Dr. Eswar Prasad, Trade Policy senior professor at Cornell University, contended that the rise of cryptocurrency could have a positive impact on the financial system, especially in the payments processing industry.

Crypto had the potential to make transactions easier, faster, and cheaper.

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