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Three federal lawmakers are calling on the U.S. Housing and Urban Development Agency to suspend initiatives that include cryptocurrency and blockchain.
In a letter to HUD secretary Scott Turner on Wednesday, Maxine Waters, Stephen Lynch and Emmanuel Cleaver pestered the agency for considering such experiments, taking into account the volatility of cryptocurrency and vulnerability to fraud. Democrat representatives, who are all members of the House Financial Services Committee, warned of repeating “the same mistakes of the past,” saying the 2008 financial crisis was partly caused by a surge in dangerous financial assets in the housing market.
“The federal government cannot allow unregulated financial products to infiltrate critical housing programs, especially when they have already proven dangerous, speculative and harmful to working families,” the lawmaker wrote.
The letter responds to a report by Propublica that it has discussed housing agencies’ recent steps towards using cryptocurrency. In this article, we discussed the February meeting. The conference explained the incorporation of blockchain and perhaps the kind of cryptocurrency known as Stablecoin, into the agency’s work. The discussion at one conference centers on a pilot project that includes one HUD grant, but attendance by HUD Finance officials showed that this idea could be applied more broadly across agencies.
“We’re looking at this for the whole company,” he said at the meeting, and the recording was obtained by Propublica. “I just wanted to start with CPD,” he added, referring to HUD’s office of community planning and development. The office will manage billions of dollars in grants to help low- and middle-income people, including affordable housing, homeless shelters and funding disaster recovery, increasing the likelihood that these forms of aid may one day be paid in unstable currency.
HUD spokesman Kasey Lovett introduced Propublica in advance comments by Turner in search of comment on the letter. Lovett previously told Propublica: “The department has no blockchain or Stablecoin plans. Education is not implementation.”
It is unclear how cryptographic projects will work. However, HUD officials hinted at the possibility of using Stablecoins, which are fixed to US dollars or other assets. This is supposed to protect stubcoins from wild swings of common value among Bitcoins and other cryptocurrencies, despite such fluctuations occurring with stubcoins in the past.
The HUD proposal raised vigilance among some officials, comparing the idea of internal discussion with recipients of the “Monopoly Money” grant. At best, a HUD staff member told Propublica before, but the idea was a waste of time and resources. In the worst case scenario, it was a threat to the stability of the housing sector.
“We’re just introducing another unregulated security into the housing market, as if 2008 or 2009 didn’t happen,” the staff said, referring to the subprime mortgage crisis. “There’s no way this can help anything. We’re looking at a lot of ways this can hurt.”
HUD officials are pushing the idea internally by the agency’s new principal, Chief Financial Officer Irving Dennis, staff said at one of the meetings. Dennis denied to Propublica that HUD was considering such an experiment. He published a book in 2021, where HUD wrote that blockchain should be used.
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Blockchain is the digital ledger most commonly used to record cryptocurrency transactions. Technology boosters portray intermediaries such as banks as ways to reduce financial transactions and make those transactions more transparent and secure. One such evangelist is Robert Judson, an executive at consulting firm EY, listed in the document Propublica obtained as an attendee at one of the HUD conferences. Judson is enthusiastic about the potential blockchain to prevent aid from being misused. (Dennis was previously EY’s partner.)
Judson and EY did not respond to requests for comment for this article, but Judson previously confirmed to Propublica that EY had discussed the issue with agency officials.
In their letter, three representatives requested extensive information from HUD on their crypto and blockchain considerations, including whether the institution assessed the risks of using the technology. The House Financial Services Committee is scheduled to consider a bill regulating stubcoin on Wednesday.
