Celebrity cryptocurrency hawkers are everywhere: former contestants on The Bachelor, Matt Damon, and Larry David, whose Super Bowl ad for virtual currency exchange FTX leveraged the comic’s cantankerous persona. (In the ad, David trash-talks iconic creations from the wheel to the light bulb—“It stinks,” he tells Thomas Edison—and finally FTX, which warns viewers, “Don’t be like Larry. Don’t miss out on the next big thing.”)
For the moment, the market sides with David. Digital currencies have tanked $1.3 trillion in value since November, prompting this Slate headline: “Bitcoin Is Just a Crappy Tech Stock Now.” The crash resulted from speculators dumping crypto (and other assets, like stocks) in the belief that the economy will slow as the Federal Reserve raises interest rates to choke off inflation.
While skeptics warn that unsophisticated investors could lose their shirts, John Beccia (LAW’01), a School of Law lecturer, sees value in well-designed and regulated digital currencies.
Beccia, who teaches a class on regulating and taxing cryptocurrency, in the past has worked in traditional finance and then as general counsel and chief compliance officer for Boston’s Circle Internet Financial, which markets a brand of stablecoin—digital currency that doesn’t fluctuate wildly in value, due to a controlled supply or its being pegged to a commodity or traditional currency. BU Today spoke with him about the possibilities and pitfalls of crypto.
With John Beccia
BU Today: We already have debit cards, Venmo, PayPal—connected to banks, but not traditional currency. What need does cryptocurrency meet that other forms of payment aren’t fulfilling?
John Beccia: For a long time, we’ve been talking about the need for faster payments, when you look at an international remittance and the pains that that takes, whether you send a wire or some other transaction, the fees—cryptocurrency has the promise to strip that out. And also to reach unbanked folks. Even Venmo—someone has to have Venmo on the other side of that transaction. [With crypto], you can have anybody with a digital wallet.
I don’t think we’ve harnessed it fully to date. At the end, we’ll have something that benefits consumers, businesses across the board, and takes a lot of the pain points out of traditional finance—speed, security, fees associated with transactions.
There are risks if these [cryptocurrency] transactions aren’t going through licensed and regulated exchanges, [as are crypto firms] Coinbase or Circle. But on the flip side, because of the nature of the transaction, it’s much more secure than typing in your credit card information online—secure from hackers, identity theft. [Cryptocurrency has] a cryptographic code that allows you to transfer something of value across the blockchain [the shared database that keeps a record of crypto transactions].
It is regulated. Companies like Coinbase let you exchange traditional fiat currency to cryptocurrency. You can use that crypto to make payments or buy things online from merchants that accept crypto. Coinbase has a similar obligation that a bank does; they have to monitor transactions, report suspicious activities to the Treasury Department. There are a lot of risks, but there’s no foolproof way to avoid this. Cash has always been the way money launderers prefer to do laundering. With crypto, there are tools you can use to see transactions; that helps law enforcement more than traditional payments activity. You can really track a transaction.
BU Today: Is distrust of banks the real motivation for crypto enthusiasts?
John Beccia: The original white paper for Bitcoin came out in 2008, 2009, right after the financial crisis. Everybody distrusted traditional finance. Here you have this decentralized, peer-to-peer system that wants to operate outside of governmental oversight, and yes, I think you had a lot more of this libertarian aspect. There is still some of that. On Capitol Hill, it seems there are more Republicans who support it.
BU Today: Isn’t there talk about the Fed getting involved?
John Beccia: Yes, the Central Bank Digital Currency. The Fed just put out a white paper on that. I don’t think that’s going to happen anytime soon. There are about 90-plus countries looking at issuing Central Bank Digital Currency. But we’re still in the early days on that. El Salvador declared Bitcoin as legal tender status, but the International Monetary Fund criticized them for that.
BU Today: Is Circle Internet Financial, or companies like it that issue cryptocurrency that is stable in value, the wave of the crypto future?
John Beccia: Precisely. I think you’re seeing developments like stablecoin that are improving on the concept. The market [capitalization] of Circle’s stablecoin is now at about $50 billion. It’s approaching something meaningful.
BU Today: What regulations and/or taxes on cryptocurrency are appropriate, and can government keep pace with the technology?
John Beccia: I’ll take the second part first. It’s so hard, and I have sympathy for regulatory agencies, because the technology is moving so quickly, once you feel you have your hands around something, there are changes. There needs to be flexibility in the regulations and a principles-based approach; you can adapt as the industry adapts. It has to be focused on the highest risks. When anybody is, for example, transferring dollars from the traditional financial system into crypto, that exchange needs to be regulated. If someone is acting as custodian, holding people’s money or assets, those types of things need to be regulated.
And then investors need to understand. There need to be disclosures, an appropriate level of understanding of the risks, similar to how you have in securities laws.