Commentary: Crypto bill is bad for small businesses

Small businesses have taken big financial hits over the past 12-plus months.

New tariffs have raised costs to small businesses that depend on importing products. The Iran war has caused the price of gas and diesel to skyrocket along with the cost of other goods small businesses need.

As a result, inflation is at 4.2 percent, decreasing consumer purchasing power, which lowers the essential sales that small businesses need to survive.

Now, the U.S. Senate is about to launch another attack on small businesses: the CLARITY Act. 

For more than 26 years I have represented small business interests at the state and national levels.

One of the key ingredients to start and grow a small business is access to capital. Entrepreneurs either bring their own capital to the business or obtain a loan from a bank, credit union or Community Development Financial Institution, which serves low-income and underserved communities.

Traditional financial institutions make their loans from the deposits of customers, including small businesses. Community Development institutions are partially funded by these same financial institutions.

Now, the cryptocurrency companies want to drain banks, credit unions and CDFIs of the funds they lend to small businesses to start and grow.

Instead of putting money into local financial institutions with community-based loan officers making decisions about small business lending, crypto companies tout putting locally grown funds into private digital wallets. The benefits to small businesses, they claim, are faster and less expensive financial transactions (i.e., buying and selling) especially in the “global” economy.

More than 200 crypto companies say their crypto platforms, where the money in digital wallets is housed, will enable small business lending and borrowing.

No need for local banks. Everyone with a crypto account can make loans to other entrepreneurs around the world who they will never meet. Likewise, decisions about obtaining a small business crypto loan will be made by those global digital wallet holders, probably with advice from artificial intelligence programs.