US Congress targets bad actors on the crypto stage – but is it savvy enough to catch them?

Part of the Capitol Hill building with the US flag flying on a sunny day.

With nearly three dozen bills addressing blockchain and cryptocurrency proposed in the past year alone, the US government appears to be making strides towards regulating the technology – but a congressman has admitted that nine in ten of his colleagues probably do not even understand how it works.

“A lot of people are just mystified by it,” said Don Beyer, congressman for Virginia. “They may be able to spell ‘crypto,’ but that's about it. I don't want to exaggerate, but maybe 90% of congress members are in that position.

“I don't hold myself to be some expert [...] it's difficult stuff,” he added. “There are probably only five or six people in Congress who could give you an accurate explanation of how blockchain works.”

Addressing a webinar – hosted on February 9 by digital media company Protocol and crypto platform Anchorage Digital – Beyer said bringing US policymakers up to speed on the complexities of blockchain and cryptocurrency was crucial, and called for more committee hearings to facilitate this.

Urgent need for oversight

Cyber researchers are increasingly calling for more regulation of cryptocurrency, a concept that has ballooned since bitcoin’s debut in 2009 to surpass 7,000 denominations. To put it another way, more than 100 million people owned some form of digital money at the beginning of last year, according to a report from crypto.com cited in a recent Cybernews interview.

With rogue nations using cryptocurrency to dodge sanctions, and cyber gangs depending on monero and bitcoin to profit from their illicit activities, fears are growing that an unregulated crypto market could end up being digital manna from heaven for such bad actors. And some would say it already is – in the past few months alone, hackers stole $1.3billion in cryptocurrency from platforms using it, according to a report published by Motherboard the day after the Protocol webinar.

“I would love for government leaders here and in the other nations to stay ahead of the criminals,” said Beyer. “Most of the human trafficking right now in America is being paid for with crypto and that's really damning. It isn't dollars going back and forth now, or even guns and heroin, it's crypto.”

But he stressed that conventional criminal gangs who deal in arms and drugs would flourish alongside human traffickers if cryptocurrency remains unregulated and reiterated concerns previously voiced about rogue nations taking advantage of the blockchain technology.

Less violent forms of crypto-related crime that posed a threat to US interests could also be effectively remedied by a centrally regulated digital currency, he said.

“One of the biggest concerns we have is fraud,” said Beyer. “Every day there is yet another currency hack, so if this is going to be a big part of our economy moving forward, why not have the absolute gold standard – a central bank digital currency?”

Choppy waters filled with pirates

Beyer was not alone at the webinar in voicing concerns about the impact blockchain could have on the wellbeing of nations if left unchecked.

Stephen Diamond, a law professor at Santa Clara university, called the platform “an unstable environment filled with fraudulent bad actors.” To underscore his point about instability, he said that during the short time elapsing between the webinar’s promotion and its airing live, the total value of cryptocurrency had halved from $3trillion to $1.5trillion.

He added that “Congress and regulators may be doing too little too late” and warned that if cryptocurrency was not brought under state supervision, there could be a financial crash caused by a mass run on banks.

He added: “We have a very robust administrative state [but] if we don't use it appropriately we could be looking at an event that makes the Great Depression look small.”

Beyer added that his colleague Bill Foster, congressman for Illinois, had suggested more radical measures of regulation – a digital signature for every US citizen that could be pegged to all their web-based assets, including cryptocurrencies and NFTs.

“So much of our information is being sold [to third parties],” said Beyer. “With blockchain and our own personal signature we may be able to monetize that – rather than letting Facebook make all the money.”