Representatives Demand Housing Agency Halt Any Cryptocurrency Experiments
Three federal lawmakers are calling on the U.S. Department of Housing and Urban Development to stop any initiatives involving cryptocurrency and the blockchain, saying the scantly regulated technologies should be kept far away from the agency’s work overseeing the nation’s housing sector.
In a letter to HUD Secretary Scott Turner on Wednesday, Reps. Maxine Waters, Stephen Lynch and Emanuel Cleaver sharply criticized the agency for considering such experiments, given cryptocurrency’s volatility and vulnerability to fraud. The Democratic representatives, all members of the House Financial Services Committee, warned of repeating “the same mistakes of the past,” noting that the 2008 financial crisis was triggered in part by the proliferation of risky financial assets in the housing market.
“The federal government cannot allow under-regulated financial products to infiltrate critical housing programs, especially when they have already proven to be dangerous, speculative, and harmful to working families,” the lawmakers wrote.
The letter is a response to reporting by ProPublica that the housing agency recently discussed taking steps toward using cryptocurrency. The article described meetings in February in which officials discussed incorporating the blockchain — and possibly a type of cryptocurrency known as stablecoin — into the agency’s work. The discussion at one meeting centered on a pilot project involving one HUD grant, but a HUD finance official in attendance indicated the idea could be applied much more expansively across the agency.
“We are looking at this for the entire enterprise,” he said in that meeting, a recording of which was obtained by ProPublica. “We just wanted to start in CPD,” he added, referring to HUD’s Office of Community Planning and Development. The office administers billions of dollars in grants to support low- and moderate-income people, including funding for affordable housing, homeless shelters and disaster recovery, raising the prospect that these forms of aid might one day be paid in an unstable currency.
Asked for comment on the letter, HUD spokesperson Kasey Lovett referred ProPublica to a prior comment by Turner, in which he said, “There’s no merit to it.” Lovett previously told ProPublica: “The department has no plans for blockchain or stablecoin. Education is not implementation.”
It’s unclear how a crypto project would work. But HUD officials alluded to the possible use of stablecoins, which are pegged to the U.S. dollar or another asset. That is supposed to protect stablecoins from the wild swings in value common among bitcoin and other cryptocurrencies, although such fluctuations have happened with stablecoins in the past.
The HUD proposal raised alarm among some officials, with one comparing the idea in internal discussions to paying grant recipients in “Monopoly money.” At best, one HUD staffer told ProPublica previously, the idea was a waste of time and resources; at worst it was a threat to the stability of the housing sector.
“It’s just introducing another unregulated security into the housing market as though 2008, 2009 didn’t happen,” the staffer said, referring to the subprime mortgage crisis. “I don’t see any way this will help anything. I see a lot of ways this could hurt.”
The HUD official pushing the idea internally was Irving Dennis, the agency’s new principal deputy chief financial officer, a staffer said at one of the meetings. Dennis denied to ProPublica that HUD was considering any such experiment. He published a book in 2021 in which he wrote that HUD should use the blockchain.
The blockchain is a digital ledger most commonly used to record cryptocurrency transactions. Boosters of the technology depict it as a way to cut middlemen such as banks out of financial transactions and to make those transactions more transparent and secure. One such evangelist is Robert Judson, an executive at the consulting firm EY, who is listed in a document obtained by ProPublica as an attendee of one of the HUD meetings. Judson has written glowingly about the potential of blockchain to prevent aid money from being misused. (Dennis was previously a partner at EY.)
Judson and EY did not respond to requests for comment for this article, but Judson previously confirmed to ProPublica that EY had discussed the matter with agency officials.
In their letter, the three representatives requested extensive information from HUD about its consideration of crypto and the blockchain, including whether the agency had assessed the risks of using the technology. The House Financial Services Committee is scheduled to consider a bill Wednesday that would regulate stablecoins.