FULL EPISODE: 10/3/21 Ranking Member of the House Financial Services Cmte. Patrick McHenry talks cryptocurrency

Published: Oct. 2, 2021 at 6:35 PM EDT
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Washington, D.C. – Greta Van Susteren interviewed Rep. Patrick McHenry (R-N.C.), the top Republican on the House Financial Services Committee, about cryptocurrency for Gray Television’s “Full Court Press with Greta Van Susteren” airing Sunday, October 3, 2021. The program will also feature a conversation with Michael McGlone, a senior commodity strategist at Bloomberg Intelligence.

Rep. McHenry called cryptocurrency “the next movement of internet technology,” adding: “That’s why it’s important that we embrace it and understand it.”

When asked whether cryptocurrency should be regulated, Rep. McHenry answered: “I think we have to have a better regulatory framework to get legitimate money brought here. And without Congress stepping in here, I fear that the Biden administration will write very bad rules that will take us back years rather than advance us years, will make us a global follower rather than a global leader when it comes to the new internet.”

McHenry also criticized cryptocurrency measures in the infrastructure bill, saying: “Within this infrastructure bill, they have a tax provision that defines digital assets, cryptocurrencies, in a very faulty and negative way. They also have a tax regime that is overly onerous with very poor definitions of how taxes would be rendered and for what exchanges in digital assets. It’s a very bad policy and it’s made worse because it’s on a highway bill.”

Rep. McHenry interview highlights are below.

Rep. Patrick McHenry Highlights

On why cryptocurrency is significant

Rep. Patrick McHenry (R-N.C.)

It’s the next generation of the internet. This is the internet of money, the internet of payments. We are, in cryptocurrency terms, where we are with internet technology and about ‘95 or 1996, very nascent technology that we need to encourage. We need to have technologies created here in the United States and deployed globally. It is the next movement of internet technology, and that’s why it’s important that we embrace it and understand it.

Greta Van Susteren

Is it going to replace … the dollar, the paper money? Are we going to see that, do you think?

Rep. Patrick McHenry (R-N.C.)

I don’t think so. I think this is another way to quickly and cheaply move value globally or to your neighbor. This takes out some centralized entities, businesses normally, that conduct transfers of value. This is also a new way for us to utilize the next generation of technology for the web, for driverless cars, for payments, for different forms of storing value or keeping track of contracts and rules. So it’s a huge opportunity set, and it’s quite a nascent technology. So the full course of what it could bring is not fully understood.

On whether cryptocurrency should be regulated

Rep. Patrick McHenry (R-N.C.)

Well, I think it currently is regulated. We have money transmission license requirements and Bank Secrecy Act and anti-money laundering laws at the federal level that have to be complied with currently. But at this early stage, it looks a lot like the internet did in the early nineties. There’s a lot going on. Not all of it is pure. Not all of it is what we embrace as a society. And over time, more eyes on this will bring those things out, will bring a better framework around this technology.

Rep. Patrick McHenry (R-N.C.)

So yes, I think we currently have some basic form of regulation. What we need to have in federal policy is an understanding that this is a new thing. It is neither a security nor a commodity in many respects. And many of these different digital assets are neither a commodity nor security. They’re neither fish nor fowl. So we need to respect it as a new entity and define that new entity, and that’s what the federal government needs to do is have that definition.

Greta Van Susteren

Well, someone like Elon Musk doesn’t want regulation for this. What do you say to him?

Rep. Patrick McHenry (R-N.C.)

Well, I think we have to have a better regulatory framework to get legitimate money brought here. And without Congress stepping in here, I fear that the Biden administration will write very bad rules that will take us back years rather than advance us years, will make us a global follower rather than a global leader when it comes to the new internet. I think we’ve got to get this right. I think we have to embrace this technology, we have to welcome this technology and that’s what I’m fighting for on Capitol Hill.

On China

Greta Van Susteren

What does it mean to us that China has made it illegal to engage in this, to trade in this, to have this?

Rep. Patrick McHenry (R-N.C.)

Well, this is a great juxtaposition between our society and theirs. What we see in China is they want to ban digital assets and they want to have a central bank digital currency. Basically they want to replace this innovation in the private sector and the diversity of offerings and have one offering by the state with a digital yuan. They also want to export that to the globe and compete with us for our reserve currency status with the US dollar.

Rep. Patrick McHenry (R-N.C.)

So we see their objective. They want a centralized, closed-off system. What we should double down on is being an open society, a rules-based regime, and we should embrace a government permissionless society that allows people the free exchange of goods and ideas. That’s who we are in the United States. We’ve got to be a better version of ourselves, not try to emulate the Chinese when it comes to regulation or speech rights or respect for human rights.

On cryptocurrency, tax revenues, and the infrastructure bill

Greta Van Susteren

Does the government skim up any money or collect any revenue or any taxes from this? If it’s regulated, does the money go into the Treasury? Because I know that we’re looking for money all the time for the government to pay the big bills we have.

Rep. Patrick McHenry (R-N.C.)

Well, that’s true, and we see this with the infrastructure bill, which is effectively a highway bill debated in Congress and we’ve seen a lot of that action over this last week. But within this infrastructure bill, they have a tax provision that defines digital assets, cryptocurrencies in a very faulty and negative way. They also have a tax regime that is overly onerous with very poor definitions of how taxes would be rendered and for what exchanges in digital assets. It’s a very bad policy and it’s made worse because it’s on a highway bill, right? It has nothing to do with digital assets, it has nothing to do with innovation.

Rep. Patrick McHenry (R-N.C.)

So we see Washington looking around for collecting the revenue in every which way, and we have to ward against that, especially when they’re trying to, through that tax policy, destroy innovation and destroy new market offerings. We’ve got to double down on innovation in order to compete globally, and cryptocurrencies and digital assets are a great way to do that.

On McHenry’s Eliminate Barriers to Innovation Act

Greta Van Susteren

Your act, the Eliminate Barriers to Innovation Act, which as I understand it, would require the SEC and the Commodity Futures Trading Commission to basically create a working group, get together and decide who’s going to regulate it, how much, how, and whether it’s really to be considered like a security, which would have fall in the SEC category or bucket or the CFTC in case it’s a commodity. Where is it? Should it be a commodity or should it be a security?

Rep. Patrick McHenry (R-N.C.)

Well, it depends. It depends on the nature of the technology. So what we have to do is have our current regulators explain the breakpoints of federal law, of what they can regulate for the SEC, what they can regulate from the CFTC, and then where there are gaps. There are clearly gaps in the regulatory framework and in particular around things like stablecoins that we need to have a better understanding of whether or not they’re a payment system or they’re a money market store value. So we need to have those understandings of breakpoints in existing law. And then Congress needs to have that definition of what a digital asset is because many of these things are not securities. Many of these things are not commodities. So we have to have that definition of what that new thing is.

On the banking industry and cryptocurrency

Greta Van Susteren

Stablecoin is pegged to ... the Euro, dollar, or some Fiat currency. Bitcoin is not. Some of the other ones are not. What are your colleagues on the banking committees think about this digital asset?

Rep. Patrick McHenry (R-N.C.)

Well, we’re going to see from the president’s working group from Treasury in the next month or so, a real broad review of stablecoins. We’re going to see from the Federal Reserve and from MIT and the Boston Fed, the combination of those. We’re going to see some working papers on digital assets. And that’s going to really speak to a lot of the questions of the framework. On stablecoins. Well, stablecoins are interesting because some view stablecoins as, in essence, a way to store your fiat currency, like in a money market fund. Very relatable to what we have today.

Rep. Patrick McHenry (R-N.C.)

And others view that as a payments system. And frankly, both are operable in the market today. There is not clarity for consumers on what you’re getting though. So the nature of a stablecoin today has not been well-defined. The regulation around stablecoins is, well, not there. So right now, it’s buyer beware when you take your US dollar from your bank account and turn it into a stablecoin dollar denominator or whatever international Fiat denominator. So what we need to have is regulatory clarity on what is a stablecoin and around what the consumer can understand around stablecoins. I think a lot of work has to be done for policymakers to understand those breakpoints.

On rogue nations using cryptocurrency to avoid sanctions

Greta Van Susteren

Do you have some attention on the fact that rogue nations like North Korea, and we’re also reading about Afghanistan, could use cryptocurrency as a way to evade sanctions that we have imposed on them for reasons that relate to our national security or our values?

Rep. Patrick McHenry (R-N.C.)

Yes. And this is a concern, but we have a technological means to trace the movement across the public ledgers, blockchain ledgers in order to do the police work and the work necessary to follow these funds. Moreover, people will talk about cryptocurrency, but they ignore cash. When this administration has delivered cash to regimes globally, they’re using those individual American dollars in order to conduct illicit financing to go around sanctions. That’s happened with the regime in Iran a couple of years ago. It’s happened with Afghanistan with the US dollars that they have and hard currency that they have. And that’s a problem. Hard cash is a problem for elicit finance.

Rep. Patrick McHenry (R-N.C.)

With digital currencies and digital assets, we have a digital way of tracking those things because of the nature of the blockchain. The idea that we can’t use innovative technologies because of bad actors, well, if that were the case, we would not have this medium that we’re on of technology. We would not have the internet. We would not have even the telephone because people are able to communicate via the telephone bad things. This goes back to the first innovation, which was tapping out code so that you can communicate across long distances, right? And people use the US mail in ways that are negative and illegal. The idea that we can’t have technology deployment because we have bad actors. Well, we’re an open society. We’ve got to go root against those bad actors and we’ve got a way to do that. Let’s still embrace innovation.

On hacking and cryptocurrency

Greta Van Susteren

What’s your position on hackers? Hackers in the form of two things: One is paying off ransomware, some company, Colonial Pipeline, for instance, if somebody else gets hacked, that’s the first thing. The second thing, if I have bought Bitcoin or some other cryptocurrency for my own personal investment, not as a way to barter or to trade or to purchase something, someone hacks in and empties my Bitcoins out.

Rep. Patrick McHenry (R-N.C.)

Those are two separate issues. So with the Colonial Pipeline, you had hackers that went in through the payment system for Colonial Pipeline. And that shut down fuel for actually my district in North Carolina, in particular across the Southeast. So the hacking of that is one issue. And then somebody taking your cryptocurrency is another issue.

Rep. Patrick McHenry (R-N.C.)

So let’s deal with the hacking issue. When we go to encryption and when we go to the next generation of internet technology that rests on digital assets, hacking will be much more difficult than it is today in today’s internet. So deploying this technology, which is really the next generation of web technology, will make it more difficult to do the type of hacking that happens today. That’s number one.

Rep. Patrick McHenry (R-N.C.)

Number two, the theft of somebody’s digital assets. Well, we have digital keys and those digital keys are particular to your wallet. The opportunity to hack into those digital keys is very difficult basically, if you have your key, your non-public key. It is a very difficult process. The easier process now is when you host your asset on some third party and they get hacked. So the innovation here around blockchain technology is that you can actually have, in essence, a safe that is removed from the internet and you can protect your asset. When you put your asset back into the internet, as it is today, and you’re giving it to somebody else to protect and they get hacked, it’s a very different thing. What I’m saying is full deployment of this next generation of web technology, those two occurrences will be more difficult than with the current web technology.

On whether McHenry has cryptocurrency himself

Rep. Patrick McHenry (R-N.C.)

No. My assets are very similar to what they were when I got elected to Congress, and I’m not in the world of speculation or investing on my own behalf even if I have a strong conviction. My strong convictions lie in public policy, not on my personal economic policies.

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About Greta Van Susteren:

Greta Van Susteren is the Chief Political Analyst for Gray Media and host of Full Court Press. Ms. Van Susteren is a veteran of Fox News Channel, MSNBC, and CNN. Her prime-time Fox News Channel Show, “On the Record,” was number 1 in its time slot for 14 1⁄2 years. Before joining Fox News, she hosted CNN’s prime-time news and analysis program, “The Point with Greta Van Susteren,” and co-hosted the network’s daily legal analysis show, “Burden of Proof.” Her legal analysis for CNN’s coverage of Election 2000 earned her the American Bar Association’s Presidential Award for Excellence in Journalism. She continues to host the weekly 30-minute program “Plugged In with Greta Van Susteren” on Voice of America, which broadcasts exclusively outside of the United States.

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