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contact information for members of congress and the biden administration. cspanshop.org. joining us is kristin smith, the executive director of the block chain association and here to talk about congress and the recent discussions they had on the topic of cryptocurrency. thanks for being with us. guest: great to be here. host: what do you do and glad to have you back? guest: we work with our 46 different member companies who are part of the cryptocurrency industry, and we work to figure out the public policy positions of the industry and advocate for those policies before congress and federal agencies. host: when it comes to the cryptocurrency itself, what is the best way for the average person to understand how it

works? guest: cryptocurrency does take a little while to understand. i encourage people to google terms they do not understand. it is a digital asset. it is something you can and give to other people -- can own and give to other people. the big innovation is that you can make transactions online in a way that does not involve a middleman. it creates a lot of efficiencies, and there are different applications that can be built around this technology. they are in the early stages today. in the future, it will lead towards a better financial services system and better internet computing platform. host: when it comes to the currency itself, what gives it value? guest: the value is derived from a couple different things. that coin is the most popular cryptocurrency. bitcoin's value is derived from

the fact that it is scarce. there will only ever be 21 million bitcoins. bitcoin is akin to gold. when you look at some of these other cryptocurrencies, they power decentralized networks that offer specific services. there is something called file coin. that is like an amazon web services. the value of file coin is derived from the value of the underlying service. host: if there is a dollar figure to be attached, how much is out there with regards to cryptocurrency? guest: it fluctuates. this year we reached the $2 trillion threshold. it is a little less than that now. it is a growing asset class. there are new digital assets that are being created all the time. the ones we have are growing in value as well. it is definitely an exciting and fast-growing space. host: one of the issues amongst

the debates before congress in the infrastructure built and reconciliation built was this idea of how to treat cryptocurrencies, especially brokers. guest: if you think of your traditional stockbroker like charles schwab or merrill lynch, one of the services they provide is they send you a form 1099 that tells you how much tax you owe for the capital gains from buying and selling stocks. in the cryptocurrency world, there are crypto exchanges, cracking, finance u.s., and with those types of brokers there are no regulations today for how they are supposed to issue something similar to the 1099. for these companies it is important that we get regulations that give them the guidance they need to offer this service to their customers

because this reporting goes to the irs, but it also goes to make everybody's life easier. the problem we had this week in congress is that the language that was included that would help provide this type of reporting for traditional cryptocurrency exchanges included a new definition of the word broker, and the way it was drafted was so broad that it would actually pull in other people who helped with the operation and maintenance of the decentralized crypto network that do not have customers and don't have information to report. as a result, these types of disease would not be allowed to operate in the u.s. because it would be impossible for them to comply. that is with the guidance is about, getting clarity on this definition of a broker so it applies to those cryptocurrency companies that truly are brokers

but leaves out the software developers and validator's and other network participants that are helping keep the network up and running but don't have that customer relationship. host: kristin smith, our guest with blockchain association coming here to talk about cryptocurrencies and related issues. if you want to ask a question, (202) 748-8001 for republicans. democrats (202) 748-8000. independents (202) 748-8002. perhaps you own cryptocurrency and want to talk about your experience, (202) 748-8003. i want to play a little bit from senator ted cruz of texas, one of the people that went to the floor of the senate and talked about this idea of regulation of crypto and admonishing other senators. [video clip] >> let's exercise a brief shining moment of common sense

and less recognize that if we have gathered all 100 senators in this chamber and have them articulate two sentences defining what a cryptocurrency is that you would not get greater than five who could answer that question. given that reality, the barest exercise of prudence would say we should not regulate something we do not understand. we should take the time to understand it. we should consider the consequences. we should not destroy people's lives and livelihoods from complete endurance. my amendment is simple. it does not add anything to this bill. it strikes these provisions. let's not do this until we know what we are talking about. let's be cautious. let's be reasonable. let's not be the number one economic developer for the

communist party of china by sending cryptocurrencies overseas to our competitors because we made it impossible for them to succeed here. host: what is your reaction? guest: i think senator cruz is right. this is an important space and is going to be increasingly important in the economy. it is a complicated space. we have been working over the past couple years to educate lawmakers and other policymakers about this. it is not something that can be done in a 15 minute meeting. you need a series of conversations that happen over time, and the crypto community has not had enough people working on these issues in washington to adequately educate all the lawmakers out there. we have been working with the irs to figure out how to do this

type of reporting for centralized exchanges. what happened with this bill is the new broker definition was added at the last minute and had never been vetted by anyone in the industry. it does reflect the lack of understanding and knowledge gap that exists with certain policymakers as to how this works. we agree with senator cruz that it would have been nice to just take all of the language out. there was another amendment that was more of a middle ground amendment offered by senator ron wyden and senator pat toomey. this amendment would have kept that language in that would have paved the way for 1099 reporting for traditional cryptocurrency exchanges. the difference is that it w as clear on that definition of a broker. if you are a software developer

contributing to the open source code on the network or building wallet applications for a validator doing mining work or validations of transactions on crypto networks that those types of things were excluded from the definition of a broker. we believe that if we had been given a vote on that amendment, there were a majority of u.s. senators who stood behind it. i think this was from my perspective working on these issues, to see this play out on the senate floor was remarkable. i don't think anyone would have predicted we would be having this type of debate on the senate floor. this is something that should go through the normal process that we should first have ideas introduced in legislation. you should have committee hearings and markups to discuss and improve those. this provision was tucked in at the last minute, and we were not able to get a

but we disagree that it is the wild west. in the united states,

cryptocurrency exchanges are already regulated in many ways. there are transmitter licenses that you have to have to operate in those states. that is not easy to get. these companies are registered with the treasury department's financial crimes enforcement effort, and there is a host of regulations that comes along with that. and then the cftc also has fraud authority over the crypto market. so there is a lot of regulation in place today. where we agree is that this sort of patchwork of regulation, where you have some state, for some federal, it does not really make sense for cryptocurrency markets to be shoehorned into this, and we think having a fresh look at how to property -- properly regulate this in a more uniform way is definitely a conversation that the industry has. we have a lot of ideas as to how to do that.

but by doing this on the tech side, kind of pushing this provision through, it just is not make sense. i putting these requirements on entities that do not have the information. that does not make any sense. that is going to stifle the innovation happening in this space because software developers will not want to live here and work on these networks. investors will not want to invest in mining capabilities here. so we are really hopeful that as we go to the house, there will be an opportunity to change this language before the will gets signed into law, because it is important. in the crypto industry, we think that these crypto networks are incredibly important infrastructures in its own right, and we need to make sure that we are protecting the infrastructure of the future, as well as the infrastructure that this is looking to fund. host: you can go to our website

to see the debate take place. our first call is from georgia, our line for democrats. you are on with our guest. good morning. go ahead. caller: good morning. this insurance by the federal government, and my suffering any loss? guest: no, there is no fdic insurance today for cryptocurrency holdings. host: what factors go into the gain or loss of the currency? guest: in terms of price movements? a lot of factors are just like the stock market and with other assets, you have macroeconomic factors. you can have factors with how the network is operating, sometimes there are sort of larger investors that make different movements and end up having ripple effects. for better or worse, sometimes

with a cryptocurrency, it depends on what elon musk says. the market is very complex. there are regulatory factors, as well. so this is not something that an investor should just jump into without doing their homework. there is a lot of thought and time i recommend be devoted before investing in this space. host: from new york, this is frank, independent line. caller: good morning. thank you for your explanation. it is very helpful. i am not even sure if my question is related. this new modern monetary theory, this is uncharted territory, as well, and i think you will agree, and it is getting worse for me because we do not seem to be caring about the debt like we used to. i guess the question i have is, how is cryptocurrency, if at

all, how does it interact with our system and this new horizon? guest: i know there are some investors, particularly in bitcoin, that are attracted to bitcoin as an investment because of its scarcity here. right now, there are about 18 billion bitcoin in circulation. over the next years, there will be an additional 3 million come into circulation. and then that is it. so this is a scarce resource, sort of similar to gold in many ways. so for a lot of people, when they look at the spending going on in washington and the money supply, they sort of look at midpoint -- at it coin as potentially something counter to what is going on there. so bitcoin and cryptocurrencies is really about the individual's

ability to own their own assets. you can custody them, just like you can hold cash, but you do not have to, in many cases -- there are some cryptocurrencies that are inflationary, but most of them have a finite number of tokens, and that also is were part of the value is derived. host: from silver spring , maryland, republican line. caller: number one, in this infrastructure bill -- i do not know which one it is going to be , but i have heard a couple of stories that biden wants to put a new tax on 401k and ira accounts. and for those who are not eligible to take any money out, this is going to be a new tax. that money was -- host: caller, i'm sorry to

interrupt, only because the nature of the conversation is about cryptocurrency and the debate in congress. do you have a question about that? caller: no, because i'm not interested in cryptocurrency. i thought we had an open line. host: there is a viewer texting us this morning, jim in california, asking, how do you prevent criminals from using crypto surrency -- cryptocurrency to get things for ransomware attack's? guest: it has been a popular topic in the headlines over the past couple of months. one of the unique features of cryptocurrencies is that the transactions are recorded on something called a block chain, a public ledger that you can go and view online and see where all the transactions are going. so there are actually specialized firms that law enforcement works with,

companies that are forensic experts that know how to go through and chase transactions through the block chain. and whenever you go from a cryptocurrency into a currency like u.s. dollars, there is a name and social security number and address identified with that transaction, because these cryptocurrency exchanges are registered as money services businesses. so law enforcement actually likes it when criminals use bitcoin, because it is much easier to track down the flows of money and ultimately find the bad guys on the other end that are perpetrating the crime. host: that was one of the concerns that gary gensler wrote in a letter about, sing we do not have enough investor protection in the crypto, and it is more like the wild west, the

acid class right -- the asset class right with fraud and abuse. in many cases, investors are not able to get rigorous balances, and i worry a lot of people will get hurt. how do you respond to the fraud and abuse part? guest: i think it is simply not true. it was the case in 2017 when some of these coin projects came online that there was sort of a period of fraud where there were people trying to take advantage of investors. but the sec cracked down on that, and what we are left with today are the good actors that are actually building useful services and applications on top of block chains. i think one of the things that is interesting about what has played out in washington over the past couple of weeks is that there were over 80,000 phone calls and emails that went into

senate offices just over the course of a couple days. the important thing you have to remember about the cryptocurrency ecosystem is it is not just the cryptocurrency industry. as i mentioned before, there are all these other individuals and small players that are contributing to the upkeep of these decentralized networks. there are also a lot of users that feel empowered because they can actually own their assets, where when you are using a bank, you do not feel like you have as much control over your assets, so there was a tremendous community response, not just industry response, but a community response of users and participants who care about these networks. and i think what the senators have seen for the first time and what hopefully chair gensler realizes is that cryptocurrency is not just something for criminals, not just fraud. that is a very small portion of

the activity, just like we had in many other industries. but what we have here is a really passionate user base that is excited about these assets, that wants to participate wants to help create them. so i think that where we are right now in washington is, for the first time, the broader set of policymakers are having to rethink some of the preconceived notions they have about cryptocurrency because there is such a response from so many individual users and constituents across the country. host: can a cryptocurrency impact the value of a traditional market, like a trust bond, etc.? >> i do not know if there is a direct correlation there. i think it depends on broader macroeconomic conditions, but i think they tend to be sort of separate, and it is not like the price of bitcoin might impact something else. the exception would be companies

that are publicly traded that have some sort of relationship to bitcoin. those stocks sometimes rise or fall depending on the price of bitcoin. host: what did you learn about that with the gamestop issue earlier this year? >> the social media has allowed information to move quickly to very large audiences. we have seen this with some stocks and with cryptocurrencies, this sort of meme driven indexing is kind of an interesting space. but with cryptocurrencies, the important thing to remember in the long run is the value of the currency will be tied to the value of the underlying network. host: thank you for this conversation concerning cryptocurrencies. you can call us and give us your thoughts.

republicans, (202) 748-8001. democrats, (202) 748-8000. independent, (202) 748-8002. you can text on (202) 748-8003. a call on the republican line. you are on. caller: good morning. now i have two questions instead of one. first of all, with all these different cryptocurrencies, and the only one i have heard of his bitcoin, do they all start here in the united states or did some resonate in different areas around the world? if so, have those other countries but any regulations in place, and is that part of the problem, other countries' regulations? help me understand, should we be thinking of these cryptocurrencies, thinking of them more as a hard asset, like gold that you buy and sell to

hold as an asset you can get capital gains and losses on? or do we think of it more as a currency to use to pay for things, like instead of using dollars to pay for things, paying for the cryptocurrency, using chickens or stuff like that, somehow trying to avoid the high bank transaction fees? or both ways? guest: we think of it in many different ways. bitcoin is a lot of different things to a lot of people. i think there is a consensus that bitcoin functions similar to gold. there are other kinds of cryptocurrencies called stable coins. particularly one called u.s. dollar coin. that is backed by a reserve, so you can always exchange one u.s. coin for one dollar. those types of stable coins are particularly well-suited for payments, so if you go to the

grocery store, you could use a stable coin to buy groceries you probably would not go and you something like gold to buy groceries. also several other specific cryptocurrencies that help run networks. so we would use that type of cryptocurrency to access a very specific computing service online. those are considered to be more like utility-type tokens. so those are different. going to your question on international regulation, you have to remember, there is no bitcoin company. bitcoin is a decentralized network, so it is not that these things are located in any one specific place. if you have access to the internet, you can participate in these networks. they are absolutely permissionless. we see that their computers are connected all around the world,

and they are sharing and operating on the same open source software that allows the network to run, so it really is a global issue, and regulators around the globe have looked at it. the u.s. has some challenges that makes it a little bit more difficult to apply regulation than in other jurisdictions around the world, because what we have here in the u.s. is a different set of financial regulators. there are multiple agencies that have different pieces. there are other countries in the world that just have one financial regulator, so it is a little bit easier for them to come up with a system because they can do it all within one place, as opposed to having to coordinate multiple agencies. but i do think that if the u.s. were to come forth with a more streamlined, conference of regulatory approach, those principles would ultimately be mimicked around the world.

but what we see today, if this tax provision goes through as is, it will make it very difficult for software developers and other network disciplines to work here in the u.s., so we will probably see that type of activity flee, which is why it is so important that we get this amendment passed in the house in order to fix the language and keep those jobs here. host: jim on twitter says crypto will be accepted at the grocery store and making that -- mechanical on services, but until then, it is with under the counter transactions. speculation. guest: there is a lot of speculation that goes on today with cryptocurrency trading. that is kind of one of the primary functions today. you have to remember, if you think back to the early days of the internet in the 1990's, it used to not be particularly easy to use the internet. you would have to make sure you are not expecting any phone calls, plug in your modem, and

you would get online, and it was difficult and challenging and cumbersome. what we have seen over time is that these kinks get worked out and it becomes easier to use and there is greater adoption. so the criticism today that this stuff is not very useful, nobody uses it, this is the early days, and there is a tremendous amount of resource and development, and there is application building happening on top of these players. so i think what we will start to see is there will be new applications that are very low cost and allow for the movement of assets in a way that is very quick and very fast and you can do at any type of ash any time of day. that is all being billed right now, so it is hard to predict. i do not think in the early 1990's, anyone with thought i could pick up a smart phone and hit a button to get a car that drives me from my home to the tv studio, but that is what i did this morning. so we do not know what kind of innovation will derive, but what

we do know is when you have these open, permissionless networks, anybody can build on top of them, and that is a layer of infrastructure that they we -- that we want the u.s. to have an active role in building, because we do think it will drive the tremendous amount of economic cavity in the years and decades ahead. host: can you explain how a bitcoin transection takes place? guest: it can happen in a couple different ways. if they accept bitcoin, than they have a wallet address, and you can send money directly to their wallet address. what we seek with a lot of merchants today is actually take that bitcoin and immediately convert it into u.s. dollars. but it does not have to be that way. they can just accept it, and that is by -- you know, i can take my send address, and there is a receive address, and a transaction happens. it is validated by a network of

computers, it gets added to the block chain, and that block chain is readable, so we know the bitcoin is now there and i no longer have the bitcoin. host: rachel from silver spring, maryland, democrat line. caller: good morning. thank you, c-span. i think this is a very interesting conversation, but i see that the ultra rich are trying to find other ways of not paying taxes. us middle-class people pay our taxes. so i agree with senator lauren. we need more regulation in this currency. it needs to be tapped. i think this is about the ultrarich again, the wealthy paying their fair of taxes. in the advocates, the lobbyists, ted cruz, he is getting paid so that the ultrarich do not have to pay their taxes. host: ok.

guest: i would say, listen, cryptocurrencies today are treated as property by the irs. that is the determination made many years ago. so if you connect any transaction in cryptocurrency, you have two differ if there is a capital gain and capital loss, and if there is a game, you have to pay taxes not it, just like anything else. there are a lot of taxes coming into the government every year. if you look at your irs forms, it asks if you hold cryptocurrency on it, and there is a lot of education going around about how to do that. i think what we were hoping with the infrastructure bill and with the industry really wants is guidance on how the industry can provide the right information to the irs and the consumer so they know how to pay their taxes. it is more difficult, but those taxes are still owed today, so

you do need to have records of all of those transactions, and you need to calculate if the gains -- if you owe money at the end of the year, and there are a lot of software platforms that can help you analyze and do your taxes. but if you are transacting in the cryptocurrencies, you pay taxes whether you are in the lower or middle income range or the ultra high net worth range. host: a question asking if you would explain in some detail what the process of crypto mining is. >> there are different types of what we call consensus mechanisms. so you have to remember, with these networks, there are all of these computers working together to maintain a database or a ledger of transactions. and today, in the traditional

world, something like an intermediary, like a bank, would be the one that keeps that ledger, and everyone who works with the bank will have to trust that the bank keeps the ledger. what we do with these crypto networks is all of the computers have to agree that a set of transactions is valid and add them to the ledger. there are different types of consensus mechanisms. with bitcoin, for example, at coin uses something called truth of worth. and this is what we mean by mining. used to just be a regular computer, but they have got much more sophisticated and now there is specialized hardware that basically solves these complex math problems, and through that process, it validates the transaction and adds it to the block chain. it is really sort of remarkable innovation in computer science, and one that is incredibly secure and is an important step

forward. there have also been other consensus mechanisms that use different kinds of models. but mining is sort of the process of validating the transaction, and then the rewards of doing that work is that you actually get some cryptocurrency as a reward. so the process of adding transactions for a period of time will create new assets, and that is the incentive for minors to contribute their computing power for the network. host: this is paul of the block chain association. caller: this is fascinating, and i happened to bump into this show. thank you for the opportunity to call in. i have a general question. it sounds like congress is attempting to regulate this market they regulate u.s. stockbrokers individually, through finra. similar to stocks.

my question, does kristin think this is actually going to happen at this point, and if it does, how long until it does happen without hurting the crypto market, it just seems like from a customer financial standpoint and also the regulation, this could be a real boondoggle. it could be real challenge to regulate. i final point is, the hedge fund market, my understanding, is not overly regulated. that is huge. it has been coming on for years, so thank you for the program and for taking my question. i am fascinated. guest: it will largely depend on what goes on in the house. we have this language that is overly broad and captures a lot of different actors that do not have the ability to act like a broker. now that the infrastructure bill has been passed out of the

senate and moves to the house, we want to get the house to change that language. that will be an interesting process because there is so many politics going on with the bipartisan infrastructure package, and other is this new $3.5 trillion human infrastructure package, and figuring out how that worked, it is unclear if there will even be an opportunity to offer an amendment while the bipartisan bill is in the house. hopefully we will, and we will be able to change it. if not, it is very possible that this language will go into law. the good news is that we do not expect the irs to immediately act. there will be a rulemaking period with notice, comment, and hopefully we can continue to keep the reporting requirements on those true brokers, those cryptocurrency exchanges that have customers and have the information, because that is where that provision needs to be focused. but we need to keep it away from

the software developers and the validators because they do not have the information and will not be able to comply. definitely stay tuned, something we will be watching closely. congress can only undo something later, it makes it challenging. we could get a second law passed that would read narrowed the definition of brokerage to where we think it would be most effective for helping out. host: the reporting system federal reserve is contemplating developing its own digital currency. if that is the case, which they consider, and how would that upset other currencies out there, cryptocurrencies out there? guest: there is a conversation happening around the globe right now are different central banks are looking at issuing a central-bank digital currency. at our association, we think there is a lot of activity going

on in the private sector that puts rappers around dollars and makes it easier to transact. -- puts wrappers around dollars and makes it easier to transact. there is innovation there. we think the fed creating some sort of currency, cbdc, if they do go forward with that, one of the great features we have with cash today is that it is private. you can transact on a peer-to -peer basis with one another, and you can do that without having to have the government peer into every transaction you're doing. we do think cbdc should have privacy and should not have full information to the government. sometimes there are private transactions, business transactions, embarrassing transactions.

we do not want to have perfect vision into every single transaction. that is what china is doing. it is not the principle i believe we should have. host: jason in san diego, democrat. caller: very interesting. i have a comment. why is it that the preferred method of payment for these bad actors for ransomware and hijackers and hostage takers, why do they prefer to get paid in these bitcoins? is it untraceable? can they hide with this, get away? can you explain why that is the preferred method? thank you. guest: ransomware existed long

before it coin existed, so it is not always that these types of attacks are asked to be paid in bitcoin or other cryptocurrencies. there are cash requirements or other demands that are out there. that being said, i think the reason they like it is because the money can move very quickly. but the reason they should not like it, as i mentioned before, with bitcoin, you can go through and trace the transaction history. it gives the law enforcement professionals a lot of ability to figure out where that money goes. so i think a lot of the headlines we see are focused on cryptocurrency because it is new -- >> we leave this segment, but you can find this discussion at c-span.org in its entirety. taking you live now to capitol hill for what is expected to be a brief pro forma session of the u.s.