Press Releases

Today, the U.S. Congress Joint Economic Committee—led by Chairman Don Beyer (D-VA)—released a new report detailing the rise and fall of the digital asset market in 2021 and 2022 and the need for further protections to mitigate risks to everyday consumers and the U.S. financial system.  

In the fall of 2021, the digital asset market reached a record-high $3 trillion market capitalization. Since then, it has lost over $2 trillion in total value as a combination of rising interest rates and high-profile cryptocurrency scandals have made digital assets less appealing to investors. The most notable of these scandals was the collapse of the third-largest cryptocurrency exchange, FTX, after it was revealed to have fraudulently engaged in risky financial bets with its customers’ deposits; its founder, Sam Bankman-Fried, was also indicted on charges related to defrauding investors. 

Existing regulatory guardrails between the digital asset landscape and traditional banks prevented the recent collapse of the digital asset market from causing economy-wide instability. But the draw of building financial wealth outside the banking system highlights the need for further federal action to protect the U.S. economy and everyday investors. Particularly given how discriminatory practices in traditional banking and finance have helped worsen levels of wealth inequality across race and class, people who are otherwise excluded from more regulated pathways to wealth-building may be drawn to digital assets as a way to achieve financial security. 

Among the new report’s key findings:  

• 2022 set records for the scale of digital asset fraud, hacks, scams and abuse, highlighting the pervasive risks to consumers in the cryptocurrency market. More than $3 billion was lost in hacks of digital asset platforms in 2022, and October was the worst-ever month for crypto-related crimes: over $700 million in losses was reported.  
   
• Newer investors with less financial cushion were hit the hardest by the drop in digital asset prices, and many everyday investors lost their savings. As digital assets have become more mainstream, smaller retail investors have increasingly entered the crypto market: Recent survey data indicate that most traders do not have a college degree, and over one-third had annual household incomes of less than $60,000. 
   
• As the digital asset market has both grown and become more interconnected, recent activity has revealed significant risks to broader financial stability. Just as the 2008 financial crisis exposed how interconnected firms making risky financial bets with borrowed funds in the absence of sufficient regulation can eventually cripple the banking system, fraud, hacks and collapses in the digital asset landscape raise similar red flags about the overall health of the crypto system. 

With the release of the report, JEC Chairman Beyer released the following statement: 

“The last two years have seen wild swings in digital asset values that have left too many everyday investors high and dry. Regular people who were trying to save for retirement, buy a house or pay for their child’s education have had the rug pulled out from under them. Decades of savings were erased virtually overnight.  

“Commonsense regulatory actions to establish consumer protections and market transparency—what we expect from financial assets—are necessary to protect investors and prevent widespread destabilization. I am thankful that our financial regulations worked to ensure the recent collapse in the digital asset market did not also cause economy-wide pain and instability. While federal investigations into criminal activity are ongoing, I hope to continue the work that is necessary to protect consumers and our broader financial system.” 

The JEC held a hearing in the 117^th Congress exploring the role of cryptocurrencies in the broader economy. Chairman Beyer introduced the Digital Asset Market Structure and Investor Protection Act, which would establish clearer regulatory jurisdictions for the SEC and CFTC over different parts of the digital asset landscape while also increasing transparency and strengthening disclosure rules.