Rep. Brad Sherman (D - Sherman Oaks) recently spoke at a House Financial Services Committee hearing on the future of money that specifically focused on digital currencies and cryptocurrencies.
Cryptocurrencies like Bitcoin, to put it extremely simply, are digital money. Bitcoin was created intentionally to be a traceable, transparent, global and frictionless method of currency that can be used similarly to cash in that you keep your own wallet and can transact without intermediaries (banks). One byproduct of Bitcoin was a distributed transaction database that cannot be edited or manipulated called the blockchain. Think about it like a QuickBooks ledger of every single transaction you’ve ever made, that cannot be changed in retrospect or manipulated by creative accounting. The use-cases and implications are massive.
At the hearing, Sherman had some strong words about cryptocurrencies. He even called for them to be banned completely for U.S. citizens. I wholeheartedly disagree with Sherman’s sentiment, and almost all of his statements.
Sherman’s first sentence stated, “Blockchain is a good technology, but it can be used to track and transfer sovereign currency.” Which led him to explicitly say “that there is nothing that can be done with cryptocurrency that cannot be done with sovereign currency that is meritorious and helpful to society.” He then stated, “Cryptocurrency accomplishes nothing except facilitating terrorism, narcotics and tax evasions.” Something that he said, “supporters delight in!”
First off, the U.S. government can and does track cryptocurrency transactions. Law enforcement uses that public transaction data to go after criminals. Not in theory, but in reality. This already happens. That is something that can be done with cryptocurrency that cannot be done with cash.
According to the Financial Crimes Enforcement Network, the U.S. dollar in cash is the preferred currency of transaction for drug traffickers and terrorists globally. More than $100 billion a year in drug trafficking cash moves through the U.S. financial system alone. As a supporter of the dollar, I am sure that Sherman does not delight in that fact.
Sherman then goes on to mention Iran negotiations, cryptocurrency’s environmental impact, how cryptocurrencies take funding away from startups and how investor protections should “at a minimum” be instated. All of these statements were worded to instill fear and all were punctuated with an ending that stated cryptocurrencies were only good for “creating a market for narco-terrorists and tax evaders.”
In the early days of the internet, you heard similar statements by politicians.
Each one of Sherman’s points had an inkling of an idea that could definitely be respectfully debated, but when stated as fact and when all roads lead to terrorism, it was clear his intentions were to instill fear and to discredit an entire industry.
I grew up in Southern California. My passion for technology, startups and staying in our region led me to found a group called 805 Startups, whose sole purpose is to foster growth and innovation for startups and entrepreneurs in Southern California. More than 1,000 of our 2,500 members live in Sherman’s district. Our goal is to make sure that great people stay here, build companies here and hire here. We also get investors from around the world to invest here.
I also co-founded the world’s largest investment focused cryptocurrency conference, Crypto Invest Summit. We are headquartered in Westlake Village and hold our summit twice a year at the Los Angeles Convention Center, where thousands gather from around the world to learn about investing in this innovative new technology.
The reason I love this industry is for the exact same reason that Sherman claims to be against it. I believe that blockchain technology and innovation is much better suited to end poverty, corruption, trafficking and terrorism than it is able to aid it. I also believe that, from a pure economic standpoint, to be against it is to create a culture that exports our brightest minds, our innovators and our entrepreneurs, which would be detrimental to our country and our region. Startups and small businesses are currently the only sectors of our economy that create net new jobs.
I can count at least 12 other cryptocurrency or blockchain companies in our region that are bringing millions of dollars in taxable revenue, investment and job growth. Standouts include:
Netki, led by Justin Newton, which is creating a compliant global identification solution. (Canoga Park).
Giftz, led by John Paukulis, former head of digital at Paramount Pictures, is creating rewards programs for Fortune 500 companies and launching a state-regulated exchange to trade those rewards.
Donodes, led by Bryce Majdick, is making impact investments in blockchain startups.
Arca Funds, led by former Guggenheim Partners Managing Director Steven McClurg, which manages institutional-grade crypto-investment products.
I want what is not only best for the people of the world, but also, selfishly, I want what is best for our community. I hope that Sherman learns a little more about cryptocurrencies before he makes blanket statements like this again. He has an open invitation for me to take him on a guided tour of amazing companies in our region or the expo floor of our summit that will most definitely change his mind.
Alon Goren is a managing director of Goren Holm Ventures, a venture capital firm in Los Angeles, and he is a co-founder of Crypto Invest Summit, a conference about investing in cryptocurrencies, as well as 805 Startups, which helps new companies in the 805 area code.