- The US needs to prioritize digital assets to increase transparency in finance, according to Chainalysis cofounder Jonathan Levin.
- “We need to make sure we continue to invest in financial technology and build the financial rails that will be used by the globe in the 21st century,” Levin said at Thursday’s Senate hearing.
- A range of experts have called for clarity on regulation in the cryptocurrency sector.
Chainalysis cofounder Jonathan Levin told the the Senate Committee on Banking, Housing, and Urban affairs that the sector should be at the forefront of protecting US interests — namely national security and public safety — and increasing transparency in finance.
In the Thursday hearing, Levin said that similar to how open access to the internet has allowed the world to witness the horrors of Russia’s war on Ukraine, a well-supported cryptocurrency market could help shine a light on illicit activities in the financial world.
“Bitcoin and ethereum are technologies that pose the greatest opportunity to increase the degree of transparency in financial services, include the excluded, and create new ways for commerce to happen,” Levin said at the hearing.
According to Levin, the blockchain would allow for heightened transparency, though it has not yet been leveraged to its full potential.
But as for what lawmakers and regulators can do to help crypto reach its potential as a tool for fighting illegal activity in finance is still up for debate in Washington, and the sector has come under intense scrutiny as an area in need of tighter rules. Its been described by Securities and Exchange commissioner Gary Gensler as “the wild west”.
Gene Hoffman, President of blockchain firm Chia Network, pointed out that more money laundering is done in US dollars than there in crypto. Luckily, he said, there’s bipartisan recognition that something must be done.
“Government regulation would absolutely make sense,” Hoffman told Insider. “We don’t stop money just because there’s money laundering. Crypto gives us an opportunity where everyone could have access to these systems, and they wouldn’t have to be country-specific or opaque.”
A February Chainalysis report revealed that online gangs are going after larger and larger sums of money, with the average
payment size increasing from $25,000 to $118,000 in crypto between 2019 and 2022.
Still, Levin said this isn’t a reason for the US to avoid investing resources in the space. He noted that while criminals have found new and innovative ways to exploit the digital landscape, illicit activity only represents 0.15% of total transaction volume.
“It’s actually much easier to trace illicit activity on the blockchain than it is in US dollars,” said Hoffman. “Public blockchains are already secure databases, and there’s a tremendous amount of experimentation happening in other countries. If the US doesn’t provide guidance here, people will look elsewhere for it to get done.”
Chainalysis’ software has already allowed law enforcement to improve ransomware crime prevention and slow down fraudulent activity, Levin added. Increasing investments and regulation in the digital asset sector can accelerate this process even further.
Billionaire and FTX founder Sam Bankman-Fried has echoed this sentiment, stating that more crypto regulation would provide additional consumer protection. He suggested a registration system for tokens, as well as a designated government branch for oversight.
Other potential regulatory moves could include broader education initiatives, Bankman-Fried said, and more clearly defined leaders as well as a roadmap for future legislation.
The Thursday Senate hearing highlighted that US policymakers are interested in making progress in the crypto space, and have shown a willingness to turn to those in the industry for guidance.
“We need to make sure we continue to invest in financial technology and build the financial rails that will be used by the globe in the 21st century,” Levin said. “Embracing digital assets will help the US build this future. These new rails can be built in a way that encourages transparency, and that not only protects our national security and public safety, but actually enhances it.”