Congressional Hearings, Mastercard Provide Good News for Bitcoin

The big story this week was Wednesday’s “crypto double-header” – a pair of Congressional hearings that explored what U.S. policy for cryptocurrencies should be.

I covered the hearings in person. And as I noted yesterday, the big takeaway is the crypto industry – and the government to a certain degree – is settling on a remarkably pragmatic (and novel) approach to regulating cryptocurrencies. If Congress actually creates a new asset class for digital currencies (part security, part commodity), the industry will be in a very good place.

What I didn’t report yesterday was some of the weird insider stuff that happened at the hearings. I saved that for our loyal News Fix readers.

  • The lead-up to Wednesday’s hearings was odd. We knew about one hearing well in advance – the one being held by a subcommittee (Monetary Policy and Trade) of the House Financial Services Committee. We found out about the second hearing, held by the House Committee on Agriculture, a day before the hearing. And that was a full committee hearing! As it turns out, the Agriculture Committee meeting was easily the better hearing. It generated a potential regulatory framework. It also showcased how important it is to have industry experts – rather than policy wonks – in a hearing.
  • The person who spoke the least had the biggest impact on the hearing. Perkins Coie Managing Partner Lowell Ness outlined the regulatory framework the industry is looking for. The SEC is already there. Congress looks like it’s getting there as well.
  • The smartest person in the room was Amber Baldet, the co-founder and CEO of Clovyr. Clovyr builds tools that makes creating decentralized applications easier. She urged Congress throughout the session to remember that blockchain and cryptocurrencies are more than digital gold – they are a platform in the early stages of development. She compared it to the internet in the early ‘90s, and she’s absolutely right.
  • MIT senior lecturer and former Commodity Futures Trading Commission Chairman Gary Gensler is sharp. He asked how many members of the Agriculture Committee owned bitcoin or another cryptocurrency. Only one hand went up. He asked the audience and about half raised their hands. That little demonstration did a nice job of illustrating to the members of this committee just how far behind the curve they are.
  • Most members of Congress still don’t understand how bitcoin works. The fact that it leaves a public, digital trail was news to them.
  • Despite the fact that they didn’t know how bitcoin worked, committee members asked some great questions. That’s a sign of great staff work. My guess is some young staffers pushed for this Agriculture Committee hearing to happen, and they made sure their bosses were ready.
  • And finally, the Agriculture Committee “claimed jurisdiction” over cryptocurrencies through its partial oversight of the CFTC, which oversees all futures trading. Of course, the Agriculture Committee usually deals with farm futures, so the oversight role is a bit of a stretch. But hey, it was the best hearing of the day, so who am I to complain.

Now on to the News Fix!

First cannabis IPO hits the U.S. market

Tilray, a Canadian medical marijuana company, went public on the Nasdaq this week. That makes it the first pure cannabis play to have an initial public offering in the United States (CNBC). As Adam Sharp noted last week, marijuana is going to turn into a booming business in the U.S. and Canada (Early Investing).

Tilray’s IPO came in at $17 a share, giving it a valuation north of $1.5 billion. According to CNBC, Tilray CEO Brendan Kennedy says “we’ll end up with smoking being about 10% [of cannabis consumption] and all the other products being 90%.”

Bitcoin Mastercard

Mastercard is getting into the crypto game. It’s patented “a method that would manage ‘fractional reserves of blockchain currency (CNBC).’” Eventually, this patent will allow Mastercard users to buy and pay for goods with bitcoin instead of dollars and other forms of fiat currency.

This news sent the price of bitcoin soaring past the $7,000 mark this week. As of this writing, bitcoin is trading at $7,409.05, according to CoinMarketCap.

IBM may launch its own cryptocurrency

IBM is considering creating a stablecoin for use in its own blockchain platform. The company currently uses stellar as its payment method. The new cryptocurrency would be pegged to the dollar in an effort to make it more stable and usable for payments (Fortune).

This is great news for cryptocurrencies. IBM entering this space is another key step to legitimizing the industry for mainstream and institutional investors.

Gold may be competing with bitcoin

And finally, the News Fix is a bit obsessed with gold these days. A few weeks ago, we reported on gold’s slumping prices (Early Investing). The price of gold has dropped even further since then. And now a cryptocurrency expert is saying 5% to 10% of the money usually invested in gold will eventually be invested in bitcoin (CNBC).

Bitcoin and gold are both hedges against the current economic system. But the bitcoin market isn’t big enough to draw accurate price and market comparisons with gold – yet. That will change over time. And it will be interesting to see what happens.

Good investing,

Vin Narayanan

Senior Managing Editor, Early Investing