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Crypto Space 'Seems Like A Ponzi Scheme': Rep. Collin Peterson

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Rep. Collin Peterson says much of the cryptocurrency ecosystem "seems like a Ponzi scheme."

He made the remarks at a U.S. House Committee hearing on cryptocurrency.

Two separate public hearings on cryptocurrency were hosted on Capitol Hill Wednesday.

The subject of hearing in the House Committee on Agriculture was "Cryptocurrencies: Oversight of New Assets in the Digital Age."

Mike Conaway, who is the Chairman of the Committee, opened the hearing by saying that "providing a strong, clear legal and regulatory framework for digital assets is essential".

Speaking after that Ranking Member Peterson said much of the crypto space "seems like a Ponzi scheme," and asked what backs the funds.

Former CFTC Chair Gary Gensler responded to it by saying that "there's really nothing behind gold either ... what's behind it is a cultural norm, for thousands of years we liked gold."

"We do it as a store of value, so bitcoin is a modern form of digital gold. It's a social construct," he continued.

Peterson said he has some "real concerns" about crypto-related scams, and noted that many ICOs result in investors losing their funds.

In his opinion, "Providing a strong regulatory framework for [cryptocurrencies] is essential. The senior representative from Minnesota called on Congress or regulators to consider developing a new framework if necessary.

Gary Gensler opened his testimony by saying that "Though there are many technical and commercial challenges yet to overcome, I'm an optimist and want to see this new technology succeed. It could lower costs, risks and economic rents in the financial system."

According to Gensler, "bitcoin is a modern form of digital gold. It's a social construct."

He claimed that there is a high failure rate for ICOs. He cited one study in February, which found that "59% of a sample of 2017 ICOs had already failed or semi-failed."

Gensler said it is estimated that "To date, 3,800 ICOs have launched and 200 crypto exchanges are operating with tens of millions of customers worldwide". About 55 percent of the crypto market value is now in tokens other than Bitcoin," according to him.

Pointing to "the threat of people going offshore for lack of clarity," Perkins Coie Managing Partner Lowell Ness said he supports reasonable regulation.

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