▶ 0:16:32The subcommittee will come to order. I note that today's committee activity will be object to this joint hearing pursuant to the House rules. This joint hearing requires unanimous consent and I do not consent. You are recognized. Um May I ask the basis for the objection from the ranking member?
▶ 0:17:02I object to this joint hearing. Pursuant to the House rules, this joint hearing requires unanimous consent and I do not Does the lady question? Will the ranking member yield? M madame ranking member.
▶ 0:17:36Mr. Chairman, I would ask if the the lady would yield for a question. Will the will the ranking member of the committee on financial services yield to a question? I'll ask again. Will the will the ranking member of the full committee on financial services yield uh to a question from the subcommittee chairman? Mr.
▶ 0:18:03Chairman, I I would just note by way of context uh for for the ranking member. I I understand your objection or I understand that you've made it. I just want to get a better insight into what is the basis of your objection so that if there's something that we can do to remove that problem, we can work in good faith to do so.
▶ 0:18:35I object to this joint hearing because of the corruption of the president of the United States and his ownership of crypto and his oversight of all the agencies. I object. Mr. Chairman, before I yield, I would just note that a good a good regulatory product, good regulatory rules of the road, I think would provide an environment where people would have more faith in the marketplace. And I think these conversations are a critically important part of getting there. Thank you.
▶ 0:19:06The the chairman of the full committee on the financial services, Mr. Hill, is recognized. Uh thank you, Chairman Style. I want to be really clear and set the record straight today. The ranking members expressed concern about conflicts of interest, which is why she's disrupting today's joint hearing. Through her actions today, the ranking member has thrown partisansship into what has historically been a strong, good, working bipartisan relationship.
▶ 0:19:29For those of you that may not know, we held a similar hearing, a similar joint hearing in this same building in May 2023 under the leadership of Chairman Thompson, then ranking member David Scott, former chairman Mckenry, and ranking member Waters. The purpose of that hearing, like today's hearing, is to discuss the importance of rules for digital assets so that every market participant must abide by them.
▶ 0:19:55I was encouraged by the engagement that we received from last Congress, by members on both sides of the aisle. There was overwhelming support from the House, Democrats, and Republicans on legislation that brings digital asset markets into the regulatory perimeter and closes the gaps in regulation. Gaps that we all agree exist. Gaps that President Biden agrees that exist. Gaps that President Trump agrees that exist.
▶ 0:20:22members worked hard to provide robust consumer protections and they did so in a manner that would make our constituents proud. We left our differences at the door and we were honest and transparent in our legislative work. Members on both sides of our committees are committed to crafting legislation to provide that regulatory clarity to encourage responsible actors in the digital asset ecosystem.
▶ 0:20:46That's what most of the members in this room are here to discuss As the ranking member currently pointed out, to hold a joint hearing, we must receive unanimous consent from both Republicans and Democrats to proceed. The ranking member received ample notice more than six weeks and negotiated an additional witness for the minority. Yet, after that good faith effort, the ranking member is objecting today. We agreed not to notice legislation to this joint hearing.
▶ 0:21:15Yet, the ranking member is objecting today. We determined a seating chart, discussed opening statements and witnesses, yet the ranking member is objecting today. I want to thank agriculture ranking member Craig and her staff, subcommittee ranking member Don Davis, chairman Benham, and our witnesses who've traveled here to be dedicated to their time to share their views with the committee.
▶ 0:21:38I also want to thank Chairman uh Thompson, subcommittee chairs Johnson and Style, and my staff for your commitment for we're working relentlessly with the minority. Hearings are an opportunity for Congress and the American people to explore important matters of policy together. Whether we agree or disagree on policy, we hold them publicly so that our constituents can understand how we work to better uh their lives.
▶ 0:22:06This hearing would have served as a forum for financial services and agriculture members to learn from our panelists and discuss solutions and two issues and given the crossjurisdictional nature of the work a joint hearing has been very very needed. While I understand uh the ranking member has concerns but by objecting to this hearing the ranking member is undermining the opportunity for these two committees to engage in a conversation of vital importance to the American people.
▶ 0:22:35That's a loss for our committees, the House, and the public at large. The of us that remain in this room will not sit idly by and abandon the urgent work we have before us that our committees have set out to do. We will sit together, hear from these good witnesses, and ask questions and learn from your expertise. We'll do the difficult work of finding common ground that on issues like digital assets that matter so strongly to Americans.
▶ 0:23:02We will try not to silence one another over policy disagreements. This is just the beginning of the discussion and I look forward to seeing how we can move forward in a bipartisan way. I yield back to the chair. Mr. Chairman, thank you very much, Mr. Chairman. Does the Does the ranking member insist upon her objection? I insist upon my objection and I'd like everyone uh to join me in CBC room 217. The objection to convening this meeting should be discussed. Trump's cryptocruption.
▶ 0:23:30the the the the ranking membmber's objection uh to the meeting is heard. We'll now move on to May I be heard on the objection? Uh the ranking member of the subcommission Lynch is recognized. Uh thank you Mr. Chairman. Mr. Chairman, ranking and and to my my my colleagues on the agricultural committee as well.
▶ 0:23:47Ranking member Waters has objected to this hearing because of the clear conflicts of interest between President Trump and his family's personal crypto ventures and the legislative proposals our committee are considering. President Trump and his family are exploiting the presidency to enrich themselves using their personal crypto business, world liberty financial.
▶ 0:24:10Never in American history has a sitting president so blatantly ethics law. I asked the ranking member I the gentleman the gentleman was was offered a moment to comment. The gentleman was offered a moment to comment on the gentleman is no longer recognized $2.9 billion. The gentleman is no longer will be recognized during this issuing a meme coin governance token. Gentleman, Mr.
▶ 0:24:40Lynch would be noticed if he was in a hearing the ability to speak under the protections that are provided in the House detail of his dealings contained. Ranking member Lynch, you are no longer recognized by the chair. The gentle lady's objection is heard. We'll now into my written my It is too bad for the ranking member that it is not a hearing. If it was a hearing, the ranking member would be protected by House rules. There was an objection from the ranking member of the full committee.
▶ 0:25:10On her objection, I object. The the committee the the objection is heard. The objection is heard and we will now move in to a round table. We want to hear from our participants who've traveled to share their expertise with us. And I would ask that participants make brief remarks. To keep our members on track, I'd also ask that they limit their comments and questions to five minutes.
▶ 0:25:34To open the round table, I'd like to ask agriculture subcommittee on commodity markets, digital assets, and rural development chairman Johnson to offer remarks. Well, a rose by any other name smells just as sweet. Uh this is uh the second public event these two committees have done together.
▶ 0:25:53I think it's a remarkable uh degree of uh cooperation and partnership and I think it builds on the work of last term where Democrats and Republicans agg and financial services work together to get things done and for me today is we get so lost in some of the terminology, you know, what about the Howie test and what about this and and what about, you know, uh custody and these things matter, but ultimately to me it comes down uh to two gentlemen, Mark and
▶ 0:26:23Mike, the egg subcommittee, or maybe it was the full committee, I forget, had a really good hearing uh a couple of weeks ago where we talked about uh the applications that uh and Don Davis was there and and and helped me uh manage that subcommittee hearing where we talked about the real world use cases of digital assets and blockchain technology and how they can enhance the lives of everyday Americans. Mark Tag, a fourth generation cattleman in Oklahoma.
▶ 0:26:53He co-founded Cattleproof to improve those cattle markets. Mike Horton, an engineer in California, developed Geodet to create an accessible worldwide precision mapping network. These are real world problems that these gentlemen have used blockchain blockchain technology uh to help uh solve. Without tokens, the blockchain wouldn't work. And neither cattleproof nor geodet would exist.
▶ 0:27:21And so, let's not forget these stories as we talk through the CFTC and the SEC and jurisdictional battles and the howy test and decentralization exempt offerings and secondary trading. This legal discussion only matters because if we get it right, it will empower entrepreneurs and it will encourage innovation. If we give Americans like Mark and Mike certainty about how to build with digital assets, they will create better services that improve our country.
▶ 0:27:52So to me, that's really uh the point of the hearing. Uh the regulatory framework only matters because innovation matters. And uh I do want to close, Mr. chairman by by thanking our panelists uh for traveling here for taking their time to uh prepare their remarks and to help make sure that we get a better product. I would want to thank uh my colleagues on the other side of the aisle who stay here and continue to do their work.
▶ 0:28:19Ultimately uh the world is run by those who show up and for members who've shown up they are giving a a uh beautiful gift to uh these committees to the house and ultimately to the American people. With that I yield. Gentleman yields back. I now recognize uh the ranking member of the agriculture committee Mr. Davis uh to offer remarks. Uh thank you Mr. Chair and to uh the witnesses who are here this morning.
▶ 0:28:48I strongly believe the future of American innovation depends on our ability to lead in the digital economy. Digital assets and blockchain technology are not passing trends. They are foundational technologies with the potential of revolutionizing everything from financial services and supply chains to how we deliver aid, store data, and connect rural communities to global markets.
▶ 0:29:16And if we want to ensure that innovation continues to flourish, we must provide a clear and forward-looking regulatory framework. And that means working to bring certainty to innovators, investors, and consumers. We must clarify the roles of the SEC and the CFTC. Reduce regulatory fragmentation and ensure the rules reflect the unique nature of this technology.
▶ 0:29:42also emphasized the enormous potential digital assets hold for communities like the one ones that I represent in eastern North Carolina. This technology could unlock new pathways for rural development, financial inclusion, and economic resilience.
▶ 0:29:59But that can only happen if we create a policy environment that fosters innovation while upholding market integrity and investor Let's be clear, American leadership in this space is not guaranteed. Other countries are moving quickly to attract talent, capital, and infrastructure.
▶ 0:30:20If we do not act with vision and purpose, we risk seeding that leadership and with it the value that define our markets. I look forward to working with my colleagues to ensure the United States remain a global leader. Thank you. I look forward to hearing from our witnesses. I yield back. I thank my colleague uh for his remark. I'll recognize myself. Uh but before I begin my remarks, I would like to acknowledge what just occurred.
▶ 0:30:49For over a month, the majority on both the financial services committee and the agric agriculture committee uh worked in good faith to organize this subcommittee hearing desired to foster a really meaningful dialogue on digital assets and the legislative solutions needed to close the existing regulatory gaps. And while some of my colleagues have chosen to leave the room, our work continues undeterred.
▶ 0:31:16This legislation is simply too important to not engage in an open public discussion about how the United States can lead in web 3. I remain hopeful that we will soon recognize the stakes and the critical importance of robust nonpartisan engagement in this process. More than 15 years ago, a nine-page document, the Bitcoin white paper, sparked a shift in how we think about money, trust, and value.
▶ 0:31:43the idea that sparked the digital asset ecosystem. Innovators have since built decentralized networks that offer services once thought unimaginable. But innovation has not followed a straight line, outdated regulatory frameworks and a regulation by enforcement approach by then chair Gary Gensler and the and the Biden administration stifled clarity and pushed jobs investment and leadership offshore. Worse, the uncertainty has exposed consumers to greater risk from fraud and mismanagement.
▶ 0:32:13Congress has both the opportunity and the responsibility to act. We must pass comprehensive bipartisan legislation that provides clarity and fosters responsible innovation. Last month, Chairman French Hill GT Thompson introduced six core principles that now form the basis of the discussion draft on market structure released yesterday.
▶ 0:32:35Today's round table will evaluate those principle and address key questions about one asset classification, two agency jurisdiction over centralized intermediaries, three reducing regulatory fragmentation, and four establishing guard rails that support innovation. To me, the path forward is clear. The choices that we make now will determine whether the United States remains a global leader in digital finance or if we fall behind.
▶ 0:33:03and I thank our panelists for being here today and I look forward to a robust and thoughtful conversation. I'll now recognize the ranking member of the committee on agriculture, Miss Craig, uh to offer remarks. Thank you so much to our witnesses for being here today. Um this is a really conversation. I'm here because I think we need to be engaged and part of the discussion to agree on the rules of the road as they relate to crypto.
▶ 0:33:32It isn't going away and we have a responsibility to be here and be part of the solution. If we're successful in working together, then legitimate enterprises will innovate and thrive and consumers and retail investors will be protected. If we fail to find a bipartisan solution to these pressing questions, we will witness more scandals and consumers will not have the protections that they so clearly need.
▶ 0:34:00It's important and it's legitimate to call out the selfdealing from the Trump administration related to hawking meme coins from the White House. It's corrupt. It's wrong. And it makes this process of coming together to regulate crypto more partisan than it needs to be. While these conversations may be difficult, they are important for our constituents. I'm pleased that we're moving forward with this round table today.
▶ 0:34:29And with that, Mr. Chairman, I yield back. I thank the gentle lady for her remarks. Uh the gentleman uh the chairman of the committee on agriculture, Mr. Thompson, is recognized to offer remarks. Thank you, Mr. Style. For two and a half years, our committees have worked together on legislation, writing rules of the road for digital asset markets. I'm proud of what we've accomplished last Congress with FIT and is a great example of what can happen when we work together.
▶ 0:34:55Unfortunately, today's an example of what happens when we cannot work together. We wind up with a second best solution. But the discussion today will go on. I appreciate all our colleagues who have chosen to make time for these witnesses and this discussion today. We have a rare opportunity to make law this Congress and to be the authors of legislation which will change the way we use the internet and how we interact in the digital commodity.
▶ 0:35:23I want to thank uh Chairman Hill, Chairman Style, and the entire membership of the financial services committee for your continued partnership in this work. I would also be remiss if I didn't recognize our terrific committee leadership and ranking member Craig, Chairman Johnson, and and ranking member Davis. We're blessed with an abundance of thoughtful legislators who are eager eager to work on digital asset legislation.
▶ 0:35:50Finally, welcome and thank you to our witnesses and especially warm welcome back to Chairman Benham. I appreciate all the time and effort you each have spent preparing for today and I look forward to the discussion and yield back the balance of my time. The gentleman yields back. Um, does the subcommittee uh chair, Mr. Lynch, offer are you interested in offering comments? I I would like to address the round table which I did not before. I I will recognize that. All right. Thank you, Mr. Chairman.
▶ 0:36:20President Trump's crypto dealings are estimated to total about $2.9 billion in value and nearly 40% of his total wealth. Between using his memecoin, governance token, and USDI stable coin, of which 75% of the proceeds go to the Trump family, every detail of his dealings contain a conflict of interest. Last week, the New York Times released an extensive investigation outlining President Trump's many conflicts of interest.
▶ 0:36:43To put it bluntly, I quote, "World Liberty Financial has eviscerated the boundary between private enterprise and government policy in ways without president in American history." Last Thursday, I know this hearing's been pl and this gathering has been planned for a while, but last Thursday in a meeting in Dubai, uh Trump's family's company uh made a deal with the Dubai uh investor to contribute to invest $2 billion uh that will benefit the the the
▶ 0:37:13Trump family. There's a clear I I understand crypto. I understand the other issues here but but this goes this is a a mechanism by which other people outside foreign interests can actually influence our president not just this one but but in the future as well and I think that's a relevant issue before this forum thank you and I and I I do thank the witnesses for their willingness to come here and assist the round table with its work. Thank you Mr. Chairman. I yield back.
▶ 0:37:43Gentleman yields back. the chairman of the financial services committee, Chairman Hill, is recognized. Thank you, Chairman. I want to thank our witnesses again for your time being away from your missions to share your views with us today. Uh, as noted, look, we we provided the uh the minority six weeks of notice and lavishly structured a joint process between the ad committee, the financial service committee, minority, and majority.
▶ 0:38:06So I just continue to be disappointed in ranking member Waters's decision to uh exit the meeting and object. In the 118th Congress, we made tremendous progress. We made significant strides to build bipartisan biccameal consensus on how to craft a regulatory framework for digital assets. 71 Democrats in the last Congress joined Republicans in passing uh last Congress's regulatory framework view that Mr. Thompson and I offered fit 21.
▶ 0:38:37It's the precursor of the work we're doing here today. We've turned the page. We're approaching it in a fresh way and this round table is essential to getting new views on how to go in a different direction. To my friends on the other side of the aisle, our doors always No regulatory framework that's fit for purpose for digital assets that provides oversight, development, and innovation in America. That's a failure.
▶ 0:39:06Just as no clarity for what is a quality dollarback stable coin, if we don't do that, that's a failure because that leaves the regulatory gap that was pointed out thoroughly by both President Biden and President Trump.
▶ 0:39:18and this committee working together with a and financial services on a biccameal bipartisan basis we're going to get the job done and I want to thank all of you for being here today I want to thank our chair and I will yield back the gentleman yields back I'd like to briefly introduce uh our participants today uh Mr. James Rothman is general counsel at Han Ventures a venture capital firm that supports cryptocurrency related startups uh Mr.
▶ 0:39:45Alex Miller is the chief executive officer at Hero Systems, a company that provides infrastructure and tools to developers building a digital global economy on top of Bitcoin. Uh Mr. Daniel Davis is partner and co-chair of financial markets and regulation uh at Kat Mutin uh and is the former general counsel of the commodities future and trading commission. Uh Mr.
▶ 0:40:09Greg Tusar serves as vice president of institutional products at Coinbase where he leads the development of the firm's efforts in prime brokerage in custody financing and exchange. Uh the honorable Rost Benham, a distinguished fellow at the Sorrowos Center, Georgetown University and former chairman of the US Commodities Future Trading Commission. Uh we thank you all for taking your time to be here.
▶ 0:40:32Uh and if you'd like to each make uh some remarks um we'll just go uh from the left uh to the right starting uh with Mr. Roth. Uh Chair Style, Chair Johnson, uh ranking members Lynch and Davis and members of the subcommittee. Thank you for the privilege of speaking today. My name is James Wrathm. I'm the general counsel of Han Ventures, a venture capital firm founded by Katie Han, who was a federal prosecutor and a general partner at Andre and Harowitz.
▶ 0:41:02Prior to Han Ventures, I was in legal practice where I primarily focused on securities offerings of all kinds. Uh from venture capital financings to IPOs to capital markets transactions. At Han Ventures, we invest in teams building with frontier technology. We believe crypto i.e. cryptographic primitives with economic incentives has the potential to modernize financial infrastructure and ecosystems.
▶ 0:41:29With new primitives, money, assets, and markets can become like everything else on the internet, transferable at the speed of information, accessible, programmable, auditable. Our portfolio companies rep reflect the ambition of this moment. Plume is streamlining the tokenization of real world assets with built-in legal and compliance tools.
▶ 0:41:55BVNK uses stable coins and decentralized infrastructure to make global payments for businesses as seamless as sending an email. Alio embeds infrastructure for digital identity and authentication while protecting the sensitive data of everyday users. And Forecaster is reimagining social media by returning control to users and developers through decentralized protocols. These teams want to build and expand in the United States, but they need clarity to do so.
▶ 0:42:24Not special treatment, just consistent rules that reflect how these systems actually work. At the heart of today's hearing is something deceptively simple. Digital assets. A digital asset is not inherently a stock, currency, or investment contract. In many cases, it's something entirely novel, a computing primitive that evolves over time and serves multiple purposes depending on the context. We need legislation that accounts for the unique properties of digital assets and evolves with them.
▶ 0:42:55But why are existing laws inadequate to meet the present need? A token might start its life primarily as a mechanism for capital raising with the initial transactions involving characteristics. But as adoption grows, that same token may evolve to primarily serve other functions as a means of payment, as a governance mechanism, or to provide access to services on a protocol. This evolution isn't incidental. It's the explicit goal of many projects.
▶ 0:43:23They aim to decentralize over time, becoming governed by open-source communities and secured through trustless consensus. Digital assets are the bedrock of this incentive mechanism. A successful legal framework must accommodate this transition. If done right, it can unlock more resilient, transparent, and accessible financial and digital infrastructure. It's not the case that digital asset issuers refuse to comply with the law.
▶ 0:43:50Our industry has tried every single pathway available under existing securities laws to conduct a token offering. But a core reality remains. Protocols depend on liquid markets, price discovery, community participation, and disintermediation. Existing law simply doesn't contemplate this. That's the legal black hole that many projects face today. So what would a better blueprint look like?
▶ 0:44:16We need a graduated framework that adapts to a project's lifestyle. Early on, lightweight disclosure regimes can help address asymmetries. As networks mature and decentralized, the focus should shift to market integrity and price discovery. Moreover, decentralized networks have incredible amounts of highresolution real-time data. Our portfolio company Artemis, for example, has developed tools for parsing and analyzing this data.
▶ 0:44:47Everything from market statistics to developer activity uh to application usage. US financial regulators were early movers in the 1980s and 1990s to adopt electronic systems and make data freely available through the internet. Here too, they should lead and work with the private sector to ensure that onchain data is standardized and disseminated into the market. The United States has led before.
▶ 0:45:13In the 20th century, we built the world's most dynamic capital markets by in balancing investor protection with financial and innovation. We have the opportunity to do that again with crypto. If we don't act, innovation won't wait. It will simply move elsewhere. And we will lose not only economic opportunity, but also the chance to shape the rules of the road according to our values.
▶ 0:45:37We believe that the future of capital markets, the global financial system, and the internet will run on open-source blockchains. So, what's at risk is not just American innovation in the digital asset space, but seeding our hard one leadership role in traditional markets as well. This Congress has a historic opportunity. The blueprint you create today will determine whether the next generation of digital asset innovation happens here or abroad. Thank you, and I look forward to your questions. Thank you very much. Uh, Mr.
▶ 0:46:06Miller, you're recognized to share your remarks. Thank you, Chair Steele, uh, Ranking Member Lynch, Chairman Johnson, Ranking Member Davis. Good morning. Thank you for, uh, inviting me today. My name is Alex Miller, and I am the CEO of Hero Systems. I've spent the last 15 years of my career on one thing, which is helping builders build.
▶ 0:46:28Our mission at Hero is to enable developers to build a global, seamless, decentralized, and interconnected economy on top of Bitcoin via the STAX network, a fully decentralized blockchain that is one of the oldest and largest layer 2s to Bitcoin. provides the speed and programmability that doesn't exist on Bitcoin uh but helps bring it to everyone and actually bring it the scale and capacity uh to be used.
▶ 0:46:58Why I'm really here today though is that hero's a little bit unique. Uh we are have been not only very proudly based in the US since our founding but when we built the first version of the stacks blockchain about seven years ago which was known as blockstack at the time we ran the first and I believe are the only company still around to have run an SEC qualified regulation a offering for tokens.
▶ 0:47:27We believed deeply from the beginning that for a project to have the firmst base to be a generational project, it needed to be built the right way, decentralized with trust and within compliance to the laws so that there was no question that it would remain around. And for that reason, we chose to make the initial offering of STX, which is the token that is used for gas and uh to create the incentives that are necessary for any decentralized system to work via regulation A.
▶ 0:47:58So that everyone, not just the accredited investors who traditionally make up regggd or the international investors who make up reggg s offerings could participate. Unfortunately, we ran headlong into the challenge that is trying to fit the square peg of new technology into the round hole of the current law.
▶ 0:48:22Due to the lack of a clear regulatory structure, trying to do it the right way has cost us at this point more than the $15 million that we raised through that regulation A offering. If we had not raised also through regggd and reggg ss, we would have spent every penny that we had simply trying to come in and register.
▶ 0:48:46It's caused us to have to create subclient suboptimal compliant structures that's made the experience worse for the users and developers on this network. And it's put us at a competitive disadvantage to projects based outside the US who are less decentralized and transparent. Hero is built by developers and for developers.
▶ 0:49:12And we proudly proudly believe in the power of free markets and decentralized technology to unleash the creativity and lift millions out of poverty. We as a society have hundreds of years to show how important predictability and certainty is to business. And just because the technology is different does not mean that the needs of entrepreneurs and builders are any different than they were a 100 years ago.
▶ 0:49:43While there have undoubtedly been bad actors in crypto, the current regulatory ambiguity helps them at the expense of honest actors and good projects. Clear regulatory frameworks will enable ethical projects to flourish while ambiguity helps those that aren't. So my ask of you today is this.
▶ 0:50:04Give builders the regulatory clarity that they are asking for with fitforpurpose cost-effective structures that let them get back to building while providing disclosures, transparency, and confidence to investors. Doing so will encourage this ethical innovation, protect consumers, and most importantly reassert America's position as a global leader in technology. Again, thank you for having me today, and I look forward to discussing this more with you. Thank you very much, uh, Mr. Miller, Mr.
▶ 0:50:34Davis, you're recognized to offer your Good morning. Thank you, Chairman Seal and Johnson, ranking members Lynch and Davis, and members of the com subcommittees and committees for this opportunity. My name is Dan Davis. I am partner at Kenmuin Rosenman and the co-chair of the firm's financial markets and regulation practice. From 2017 to 2021, I had the honor of serving as the general counsel of the commodity futures trading commission with among others then commissioner Benham. It's good to share a table with you.
▶ 0:51:03Um I speak today in my personal capacity. I have two points regarding the CFTC to make in these remarks. first, the CFTC is already engaged in a significant portion of the digital asset markets and second that the CFTC is the natural federal regulator to provide additional authority for the digital asset spot market. But first, the CFTC is already engaged in a significant portion of the digital asset market.
▶ 0:51:33Let's start with basics. A digital asset is a commodity. Every court to address that question has ruled that a digital asset is a commodity. If I sell that digital asset to somebody else, that is presumptively a commodities transaction. The CFTC has enforcement authority over that transaction. If there is fraud or manipulation, the CFTC can prosecute that transaction, but that's all it can do.
▶ 0:52:01If I put a future on top of that digital asset, you get full CFTC regulatory jurisdiction. I have to register. I'm examined. And I have to comply with CFTC core principles and regulations. If I put a swap on top of that digital asset, again, full CFTC jurisdiction. If I put an option on top of that digital asset, full CFTC jurisdiction.
▶ 0:52:26Also, if I sell that digital asset to a retail person and I offer them financing or leverage and I don't actually deliver the digital asset to them within 28 days, that is also full CFTC jurisdiction and that's section 2C2D of the CA. So, the CFTC already has a lot of jurisdiction over a wide array of digital assets. How much exactly?
▶ 0:52:55Well, right now there are about 20 or so CFTC regulated products based on digital assets that are either trading or have been self-certified to trade. Those 20 or so digital assets account for about 83% of the global market capitalization of all digital assets, 83%.
▶ 0:53:17Thus, the CFTC and its regulated entities are monitoring, surveilling, and engaging in at least 83% of the digital asset market, and they've been doing so for about a decade now. I'm encouraged by uh many parts of the bill, but one part that jumps out at me is section 202 uh that recognizes that secondary market transactions should not be securities, but commodities transactions subject to CFTC regulation.
▶ 0:53:45I believe that is the correct application and interpretation of the Howy test. I would go one step further than section 202 and I would say that uh digital assets issued by issuers in blind bid ass transactions are also commodities transactions and not transactions. That brings me to my second point. If there is to be a federal regulator over the digital asset spot market, the CFTC is the natural choice.
▶ 0:54:11As I have just illustrated, the CFTC already interacts with a large portion of the digital asset environment. It has at this point extensive experience with the trading and operation of these products. In addition, the Commodity Exchange Act's principal-based and self-certification approach to regulation provides an environment in which these markets can develop with strong customer protections and market resiliency.
▶ 0:54:34The CFTC knows how to look over these markets, examine entities for compliance with core principles, and work with market participants to understand how these products and trading works and to innovate to make these markets the envy of the world. We have a great opportunity to improve regulatory clarity and bring trading in these important markets to the United States. I again thank you for your time and look forward to the discussion. Thank you very Thank you very much uh Mr. Davis uh Mr.
▶ 0:55:03Greg Tousar, you're now recognized to share your comments. Thank you. Good morning, Chairman Style and Johnson, Ranking Member Davis, and members of the committee. Thank you for the opportunity to testify today. Um, I appreciate the opportunity to discuss the future of financial markets and the critical need for regulatory clarity in the digital asset space. My name is Greg Tusar. I serve as vice president of institutional product at Coinbase. I spent over 30 years working at the intersection of technology and finance.
▶ 0:55:33And one thing I've learned is that markets work best when rules are clear and technology is embraced, not ignored. Today, we are experiencing a major market shift, similar to the transition from floor trading to electronic trading, which I experienced firsthand at Goldman Sachs. This is a major technological shift that will enable new products and services across markets and asset classes.
▶ 0:55:57It will open up opportunities for both crypto and traditional players alike and will create new economic opportunities for millions of Americans. But we need smart rules to help us usher in this transition in order to foster innovation, protect consumers, and ensure US leadership. This is a once in a generation moment to go back to first principles and design markets for the 21st century.
▶ 0:56:24This discussion draft released yesterday is a strong step in that direction. Although we are still digesting the digital market digital asset market structure act, it seems to build on the bipartisan consensus in FIT 21 that would modernize our outdated systems and expand access to financial opportunity. Today, I'd like to highlight three recommendations for Congress to consider as you move forward on market structure legislation. First, we need to close the gaps in the current system.
▶ 0:56:54Today, there is no federal regulator with spot market authority over digital commodities. Exchanges and intermediaries are regulated by a patchwork of state laws that impose varying levels of consumer protections and create confusion in the market. The CFTC is the right federal regulator to oversee the spot market. It has long overseen crypto derivatives and has decades of experience with complex markets.
▶ 0:57:20Through its thoughtful work, it has also helped enable exchange traded products under the jurisdiction of the SEC. We should now empower to do the same for crypto spot markets in order to ensure national standards, proactive oversight, and consistent protection for every consumer, no matter the zip code they live in. Second, we need to resolve the confusion over token classification. Today, developers are forced to guess whether a digital asset might be deemed a security.
▶ 0:57:48now or down the road and often after lengthy litigation. This ambiguity has driven responsible projects overseas and allowed other countries to take the lead. Congress must draw clear lines and give both the SEC and CFTC distinct but roles. Third, as I mentioned earlier, Congress should embrace the first principle of creating efficient, fair, and customerfocused market solutions.
▶ 0:58:15This means harnessing the benefits of technology to mitigate risks and modifying rules to meet customer expectations. A a good example of this regulatory evolution happened in the late 90s when the SEC finalized ATS. This this rule recognized that electronic trading was evolving outside of traditional exchanges and should be brought inside the regulatory perimeter.
▶ 0:58:39The new rules enable tech exchanges and brokers to operate order matching systems, also known as alternative trading systems, which reduce the risk of opaque and fragmented markets. This framework is still in place today and is a good fit for crypto.
▶ 0:58:57Coinbase supports the approach in the discussion draft that would allow for the ATS structure as well as create symmetry across the CFTC and SEC for regulating digital asset commodities and digital asset securities respectively. In closing, I want to thank both committees for your leadership on crypto legislation. We are excited to move more fully to more fully digest the discussion draft released yesterday and look forward to building on the bipartisan success of FIT 21. Thank you and I look forward to your questions.
▶ 0:59:28Thank you very much. Uh the honorable Austin Benham is recognized for five minutes to share your remarks. Chairman Hill, Chairman Thompson, Ranking Member Craig, Chairman Style, Ranking Member Lynch, Chairman Johnson, and Ranking Member Davis. I'm honored and grateful to testify before you today. Before between 2017 and 2025, I had the privilege of serving first as a commissioner, then as a chairman of the CFTC.
▶ 0:59:52During that more than seven-year period, I observed the significant growth of the digital asset market and wider adoption of digital assets by both institutional and retail investors in the United States. I also observed the digital asset market endure multiple periods of dramatic volatility, often significant in size and scale. Throughout this time, I publicly repeated one consistent message to Congress. Under current US law, there is a gap in regulation for the non-security digital asset market.
▶ 1:00:23The regulatory gap remains today and has facilitated countless scandals and fraudulent activity. First and foremost, filling the regulatory gap will provide the needed customer protections that American investors have been accustomed to in traditional markets.
▶ 1:00:38One common refrain in connection with past legislative efforts to fill the non-security gap suggests that a US regulatory framework will legitimize the digital asset market, leaving opportunities for bad actors and industry players to capitalize on regulatory loopholes and unwitting retail investors. Though well-intentioned, I believe this argument is the loophole.
▶ 1:01:01It has only left for far too long the vast majority of the digital asset market unregulated and American investors vulnerable to fraud and manipulation. I've consistently called for new legislative authority for the CFDC in order to provide core customer protections in the nonsecurity digital asset market.
▶ 1:01:21As both committees consider a legislative solution, I believe it's critical to rely on durable legal precedent as the framework to define digital tokens as securities or commodities and recognize that the nature of commodity assets do not necessitate an identical regulatory framework as do securities.
▶ 1:01:42Given the critical role the SEC plays in the oversight of securitybased digital assets, the committee should consider legislating a disciplined, flexible, and balanced framework for the determination of tokens as either commodities or securities where intermediaries handle both security and nonsecurity tokens in the cash market. Separate jurisdiction is critical to a healthy con comprehensively regulated ecosystem.
▶ 1:02:08Currently, there are numerous examples of individuals and entities dually registered with the CFTC and the SEC. In these instances, each agency retains its licensing authority over the reg.
▶ 1:02:22Any regulatory system that contemplates a different model where one agency defers to the other or is simply notified of activity within its jurisdiction will be nothing more than a paperclip and a band-aid on the existing gap in regulation, leaving bad actors and arbittors opportunities to exploit weaknesses and leave American investors at risk.
▶ 1:02:44Further, any framework where each agency does not retain its exclusive licensing authority pretends a future of blurred jurisdiction across other financial products like agricultural and energy to name a few. While preserving each agency's authority is critical, supporting cross agency collaboration consistent with what is practiced today and which may include tools like portfolio margining and other netting mechanisms is also beneficial where appropriate.
▶ 1:03:15As both committees continue to consider legislation to fill the gap, I'd like to focus attention on the components of a regulatory framework that would ensure the CFTC has the tools to provide customer and market First, the principalbased oversight model has served the CFDC and its regulated markets well, striking an appropriate balance between clear outcomesbased requirements and measured flexibility to meet those outcomes.
▶ 1:03:43Second, appropriate funding is necessary to meet the mandate of any legislatively enacted regulatory program. I would strongly encourage the committee and the Congress to consider a permanent fee for service model exclusively assessed on digital asset regist. Third, and following my earlier point, any legislative package should regarding traded tokens to ensure investors have access to material information.
▶ 1:04:10Fourth, an effective legislative effort mandating a regulatory framework for digital assets must include a role for self-regulatory organizations. Fifth, it's essential that legislation provide comprehensive authority for anti-moneyaundering, know your customer and customer identification program built off of existing requirements under US law for market participants.
▶ 1:04:33And finally, a comprehensive education and outreach program will enable the investing public to understand both the risks and opportunities of this technology. The current divide between the US and our international counterparts creates regulatory arbitrage opportunities that are exploited by bad actors and prohibits the US from truly contributing to much needed multilateral coordination efforts.
▶ 1:04:56Further, the potential economic benefits and innovation arising from this technology ultimately will be unmet without regulatory certainty. The principles and regulatory foundations that have made US capital markets and derivatives markets the deepest, most liquid, and most resilient in the world provide an effective model for the digital asset commodity market. We need to act thoughtfully but with urgency to fill this harmful regulatory gap in order to give American investors the protection they deserve.
▶ 1:05:27Thank both committees for your focus in this area and look forward to answering your questions. Thank you very much. We thank all of our participants for being here and sharing your expertise. Uh we'll now move on to questions in the round table. As this is a round table uh and not a hearing, I will control uh the time. Uh I ask all of our uh members uh to hold their questions to roughly five minutes. Um and I will do my best uh to alternate between not only parties uh but also full committees.
▶ 1:05:56Uh we'll begin uh by the chair of the subcommittee on agriculture, Mr. Dusty Johnson. I'll start by thanking former chair Benham. Uh it it was a remarkable investment of your time last Congress. You and I talked on Saturdays. You and I talked on Sundays.
▶ 1:06:14uh you were uh you understood it was not your job to craft legislation but instead to provide the members of this committee insight needed to try to do right by this complicated policy issue. And sir, you have been a clear and consistent voice that legislative inaction endangers consumers. And you said it again in your testimony today. It is a clarion call that does right by uh this process. And I just want to thank you for that.
▶ 1:06:44Uh Mr. Davis, I thought your testimony was spot on. Uh I just you talked about the CFTC being the natural choice to be the digital asset spot market regulator. You talked a little bit about why, but tell us more. Oh, first of all, the CFTC has the experience, right? I was I was in the room when chairman John Carlo in 2017 was discussing you know Bitcoin futures and the wrestles that the agency was having with it back then.
▶ 1:07:15Uh this agency has been wrestling with those issues ever since and actually before that time. And there's there's a lot of learning that's been gained there. You know when you have a Bitcoin futures market you have to if you if a company self-certifies that they have to say that that product is not readily susceptible to manipulation. The only way you can know that is if you're monitoring and surveilling the underlying Bitcoin spot market. So, a natural part of the CFTC, you know, monitoring and examination regime has been the spot market.
▶ 1:07:45Obviously, it started with Bitcoin, which accounts for on any given day about 60 to 65% of the market. It grew to Ether, which is another, you know, 8 to 10% of the market. And as I noted in my remarks, there's now 20 digital assets uh that are either self-certified or trading.
▶ 1:08:01And so you have uh an agency that has the experience of understanding looking under the hood looking how the spot market operates where it works well where it doesn't has examined you know uh parties uh CFTC reg as as uh you know as chairman Benham can attest has brought a number of enforcement actions for fraud and manipulation that require an understanding again of how the spot markets work.
▶ 1:08:26And I guess I would just uh core principles work. Core principles allow entities to use innovation, productive, effective thinking to find effective ways to resolve the problems that we all know exist in any market. Worries about fraud, worries about manipulation, worries about cyber security, worries about reporting.
▶ 1:08:50the core principle construct that the commodity exchange act embraces really would allow this market to thrive. Mr. Tousar, and in your testimony, you you noted similarly that the CFTC has decades of expertise in complex markets. What what else would you add to Mr. Davis's comments?
▶ 1:09:11I wholeheartedly agree that the um that the principles based regime is the is the right regime uh for the digital asset ecosystem and market to really develop. This is a critical moment in um in the evolution of this space and it needs it needs a a market structure that allows for innovation but that also has the strong consumer protections that the CFTC and commodities exchange act um provide. And so those two principles are critically important.
▶ 1:09:41As I noted um in you know my remarks also the regulation ATS offered the same thing in the securities world. Um you know that similar parallel infrastructure in the CFTC regime will be critically important to allow exchanges to evolve but at the same time u and also recognizing the unique characteristics of of digital assets. they settle instantaneously.
▶ 1:10:08Um they don't have the same sort of credit risks and characteristics that um you know that normal securities or or commodities have. And so putting the both of those things together will be critically important. So for each of the panelists, you said it in your testimony each of you in a different way, but I want to make sure I understand uh basically a yes or no question. Does the absence of a clear regulatory regime do a disservice to consumers, investors, and innovation in the digital asset space?
▶ 1:10:38Mr. Wrath Mill, yes. Mr. Miller, absolutely. Mr. Davis, definitely. Mr. Tousar, yes. Chair Bennett. Yes. Thank you. With that, Mr. Chairman, I'd yield back. Gentleman yields back. Uh, the ranking member of the subcommittee on agriculture, Mr. Davis, is recognized. Um, thank you so much, Mr. Chair. I want to direct a question towards um Chairman Benham.
▶ 1:11:01Um it's been made evident um by you that Congress is required to take action in order to address the regulatory deficiencies um pertaining to digital um asset markets. um as the former chair of the um CFTC um you directly observe the ramifications of inaction um as well as the promise of the legislative solutions that u my colleagues and I are endeavoring to promote.
▶ 1:11:28Um I listened to your testimony earlier and it seems like you've laid out what seems to be a very reasonable framework. Um my first question is um what would you prioritize within that structure um that you outlined and then the second part of the question would be um what's the importance of all of this moving together the interchangeability of this framework
▶ 1:11:59for instance if Congress failed to provide adequate funding or if we didn't educate um I would really love to hear u more in terms of this framework that you laid out. Thanks, Congressman. Uh, you know, above all else, um, and Mr. Davis alluded to this, the CFTC has been very active on the enforcement side of the ledger over the past 11 years. I think the first case the CFDC brought was in 2014 um, in the spot market with very limited authority.
▶ 1:12:27So as as this committee and these committees think about what authority is needed, it is much like the traditional authorities that both the CFDC and the SEC have in traditional markets. And I alluded to this within the core principles. Um it's around registration of intermediaries whether it's exchanges, brokers, custodians, um introducing brokers or anyone sort of in the trade cycle that is involved with giving access to financial assets to customers.
▶ 1:12:57That has to be the centerpiece and I believe at least in the draft that I saw briefly yesterday, that is the centerpiece of what you're proposing and that has to be the starting point. everything else I listed, which is critical. The CFTC is not going to be able to do the work if they don't have the appropriate funding. And I I wrote this in my right submitted testimony at more length with any congressional mandate. There's going to have to be more funding. And I think that's a critical piece because without that, this job just won't get done appropriately. And we need this to get done appropriately.
▶ 1:13:27Above all else, customer education. Far too often um I've personally experienced or the agency has experienced very vulnerable um individuals sometimes from lowincome communities who just don't have financial literacy to understand the risks associated with digital assets. So it is a a multi-piece puzzle that has to be built one piece at a time.
▶ 1:13:50But I would encourage and certainly support the committee's effort to do this comprehensively and as quickly as possible. but in one shot and um doing anything peacemeal and holding out for another sort of effort down the road. You know, I understand things are difficult, but ultimately if we're going to do this right, it has to has to be done comprehensively. And that's the registration, that's the surveillance, that's examination, that's making sure cyber uh and operational risk, that's you know communication, funding, education.
▶ 1:14:20It's a lot, but it is very very much uh comparable to what we do in traditional derivatives markets or traditional securities markets. Thank you so much, Mr. Chair. Uh my next question, and this would be for everyone, but I would definitely start with uh Mr. Tousar. Um the discussion draft for the market structure bill was released yesterday. Um any early thoughts? I would just love to hear any early thoughts. Yeah, I appreciate the question. Thank you, Congressman.
▶ 1:14:48Um early thoughts, as I said in my opening remarks, it is a strong step in the direction of um making a few things um very clear. First of all and maybe most importantly token classification which today uh is is very unclear with respect to uh the difference between commodities and securities and uh which fall under which regulatory regime. Um and so it's excellent to see forward progress in that direction.
▶ 1:15:16Um also that um you know importantly that there is the potential for there to be harmonization between the sec digital asset securities and digital asset commodities trading because what we anticipate is that these things will need to exist not just side by side but in the future in some integrated way and so it's important that the um the two regimes on the CFTC and SEC side are harmonized to the greatest degree possible so that consumers are afforded
▶ 1:15:47the same protections and and those sorts of things as we anticipate that they will exist on the same platform and the expectations will be uh similar. And thirdly, that there is a potential path to have an integrated federal level uh regime for custody potentially as well, which we think is important.
▶ 1:16:05Um the the potential for leaving custody unressed on the commodity side leaves open for the potential to be federal level regulation for trading and listing of assets but state level regulation for custody which we think um leaves the potential for gaps uh there as well. But those u we feel in conclusion it's a strong step forward. Thank you and y thank you very much.
▶ 1:16:32Um I know some people chose to leave but I think if you look around this room uh a lot of members of both parties uh and both the agriculture committee and the financial services committee is here because this topic is so important and I think the danger we have in this country is if we put our head in the sand and fail to regulate in this space um we actually have more risk than we do today.
▶ 1:16:56Some of my other colleagues will say no we we live in a less fair why regulate at all and I think what is lost in that is that there is currently a large number of regulations that don't fit well in the digital age in the token age and in digital tokens and so what I want to do with you Mr. Mr. Miller, if I as I can is let's go back and learn a lesson uh about hero. You went through the reggga process. You commented on this.
▶ 1:17:24Um is the current exemption framework for raising capital compatible uh with the digital asset ecosystem? So in short, it's definitely not compatible. Um, if you look at all of the current securities law exemptions and registration schemes and qualification schemes, they're all based on the fundamental idea of either a debt or equity offering in a company.
▶ 1:17:46And again, as someone who spent a long time in the startup world and worked with investors, like regggd works great for raising from, you know, accredited investors, angel investors. So to dive in, so the people that are investing, are they getting the clarity that they that they should? That's the fundamental thing is the registration scheme is all about um aspects of the company, right? So, Hero remained long after decentralization remained a reporting issuer with the SEC. You can go see these reports. They're about a dev tools business.
▶ 1:18:17So, it doesn't get the information that that an investor needs. And then the question then becomes, of course, what was the cost associated with it? What did you raise and what did you spend? So, our reggga raised about $15 million. It cost probably $3 million to run the reggae. And this is my frustration because what we want to do is make sure that the next innovators are in dorm rooms and basements, not in boardrooms and law firms. Exactly. And it sounds like as you went through this process, you probably spent a lot of time in boardrooms and law firms. Absolutely.
▶ 1:18:45And if you didn't have that kind of capital, you probably couldn't do this in your parents' basement. Nope. Because you'd have to spend millions of dollars in very tall building attorneys uh navigating through uh with the regulatory agencies. Correct. And that's why we see small teams who are trying to be upstarts moving offshore today. And so you would agree that we have to create a new system for digital assets to be able to efficiently go through the process and provide the clarity uh to prevent abuse. Absolutely. All right. Let me let me jump over.
▶ 1:19:12Another impediment in the digital asset ecosystem is the legal classification uh of the assets. Are they securities, commodities or or maybe something else uh entirely? U Mr. Mr. Rathmemell um your guidance uh has been useful for projects in determining whether or not they'll be classified um is a security or not. The the SEC put forward a rule 2019 a 60 factor test.
▶ 1:19:39Um is this helpful at all or does it just add more more complexity into the system? We're grateful for the clarity. Uh certainly the the challenge that we've consistently run into in the space uh as Mr. Miller alluded to is that we have uh startup teams who may have raised perhaps a few million dollars who are spending a disproportionate amount on uh reading the legal tea leaves. Uh and I think the 2019 guidance is kind of part and parcel of that. A 60 factor test is not really workable for you. It's not workable.
▶ 1:20:09Do you have did you have to create your own internal process? Uh for us particularly at a venture capital firm or Say it again. For us specifically at venture capital firm. Yes. I certainly we've looked at the 2019 guidance. We've looked at the Hidman's speech um as we're assessing you know the security status of of an offering.
▶ 1:20:27Um but uh certainly there's a comprehensive kind of across the space a lack of legal clarity and so so even with the guidance that came from the SEC you're finding yourself spending big bucks on attorneys rather than on innovation development. Fair absolutely and the same is true for all of our founders. So so let me jump over to you if I can Mr. too as we as we wrap this up because the other logical path of course people would say well don't worry Mr. style. There's we go for a state approach.
▶ 1:20:54Um, and I think your background at Coinbase um, really gives us an opportunity to dig into that. Uh, can you could you kind of highlight the impact the existing regulatory structures for digital asset uh, trading platforms and how it exists uh, in particular at the state level? Maybe that's a path. Yeah, thank you for the question, Congressman. We think it is critical that there be federal level regulation that today we have a variety of different approaches.
▶ 1:21:20Uh we have money transmission licenses from state to state which leaves customers with different levels of protection, different levels of um uh our ability to have product state by state when it comes to things like staking um and different levels of disclosure that are required. And so we've advocated for some time that there absolutely needs to be federal level regulation. And so we're excited for this, you know, for this bill to to move forward to close the the gap as it exists today. Thank you very much.
▶ 1:21:50I think what we've heard is the the current state regulatory framework doesn't work. The current SEC regulatory framework doesn't work. And the work of Chairman Thompson, of Chairman Hill to bring forward this market structure legislation is absolutely essential to provide clarity to make sure that there's innovation and development occurring in the United States without the need for high-priced attorneys and making sure that the United States wins web 3 and we're in a position to out compete China. I'll yield back.
▶ 1:22:18I'll now recognize uh the ranking member on the financial services subcommittee uh Mr. Lynch to offer comments or ask questions. Thank you, Mr. Chairman. Much appreciated. I think the the greatest asset that we are, the greatest characteristic of our financial system at large is is trust. I I think that's that's really what sets us apart uh from from other countries.
▶ 1:22:45That's why we do so well with foreign uh people trust the system that the that the the laws will will apply and and they have a a menu of rights that they can exercise. Uh in the last few weeks under the Trump appointed leadership of the SEC, uh the SEC dropped almost every single lawsuit against some of the worst offenders in the crypto industry.
▶ 1:23:10uh companies such as Crypto.com, Ripple, Kraken, Gemini, Binance, Coinbase, Robin Hood, and Uniswap. Those all have a proven history of of irresponsible, predatory or Then the Trump-appointed uh credential banking regulators were directed to to rescend the thoughtful guidance that advised financial and depository institutions to
▶ 1:23:40exercise caution in engaging with crypto. This is just a concern because you got people's deposits uh that there's supposed to be a stability there and then you've got crypto that is extremely volatile. It was a common sense uh guidance And then a few weeks ago, the Justice Department announced it is disbanding the national cryptocurrency uh enforcement team, which had been charged with combating fraud and elicit finance in crypto.
▶ 1:24:07Brick by brick, President Trump showing us how democracies die. We're seeing longstanding investor and consumer protections dismantled, all to further President Trump's personal interests. And I I believe all of these moves uh serve to have a corrosive effect on that trust that I talked about in the beginning. And in an even more appalling move, President Trump advertised a private dinner.
▶ 1:24:36You know, this is outrageous if it'd be funny if it wasn't true. Uh advertised a private dinner at his golf club for the top 220 investors in his meme coin. in his memecoin has zero value in reality, followed by a private White House tour for the top 50. That just screams government for sale right there.
▶ 1:25:00And then last week, as I mentioned before, at a conference in Dubai, it was announced that a fund backed by Abu Dhabi would be making a $2 billion business deal using President Trump's firm's digital coins. a foreign government will be making a direct major contribution to President Trump's wealth which stands to make the Trump family hundreds of millions of dollars. Mr. Davis, Mr.
▶ 1:25:29Benham, I'm I'm I'm aware of your history, Mr. Davis, your former general Don't you don't you think that that undermines the the the it's it's it's look if you're really hoping for the greatest future for crypto that scamifies everything. It looks it looks shady.
▶ 1:25:51Is is there a way to to to promote crypto without first of all do you think that's helpful to crypto all all of those all of those measures? Sir, I have no comment on what the president or what his family if I was an attorney, I wouldn't answer that question either. Mr. Benham, CFDC, you you you've been in the seat before. You've actually you're familiar with the ex ethics laws as as uh and so is you, Mr. Davis. You think those those breach the ethic laws?
▶ 1:26:22Either one of you, Mr. Davis, or or Director Benham. Congressman, I you know I I said this last week or a few weeks ago in response to a question about a similar the similar issue or same issue is there are well-built out and and decades old ethics rules around all government officials whether it's elected officials, appointees or everyone across uh the US government and it's extremely important that those rules are upheld for the same reasons you stated at the beginning of your comment.
▶ 1:26:49Um, and I say this often as well, the health and the size and the demand for US capital market instruments, whether it's equities or derivatives, is because of the rule of law, because of the confidence and the integrity that foreign investors, but also US investors have in the accountability of our regulators, whether bank regulators or market regulators. And I do think uh for that continued success and growth and economic um all just reclaiming the last 15 seconds of my time.
▶ 1:27:19All I'm saying is it it might some of those moves might have pumped up the short-term price of crypto. I think the long term it's very very bad for crypto. You want to have credibility. You want to have trust. And I don't think you're getting that with all those moves that I just I just uh remarked upon. Thank you, Mr. Chairman. I appreciate your courtesy. I yield back. Gentleman yields back. The chairman of the agriculture committee, Mr. Thompson is recognized. Chairman, thank you so much. Uh, chairman Benham, welcome back. U, it is nice to see you here.
▶ 1:27:48In 2023 and 2024, there was some uncertainty about the legal status of either as then SEC Chair Guensler asserted, either may in fact be a security, despite the CFTC publicly stating it was a commodity several years prior. You and others suggested that a sudden reversal in the settled treatment of a digital asset could be disruptive for anyone participating in derivatives market.
▶ 1:28:16Please describe the uncertainty and confusion caused by the SEC claiming one thing and the CFTC claiming the opposite. Uh thank thanks Mr. Chairman. you know, as we had uh contracts listed and now there are many more than when I was chair, but um when contracts are listed on CFTC exchanges as derivatives, um there is essentially an assumption that the underlying asset is a commodity.
▶ 1:28:42So when we had listed Bitcoin futures in 2017 and then listed Ether futures a few years later there was a assumption legally that the underlying asset in that case Bitcoin and Ether were commodities.
▶ 1:28:55So uh any confusion in the public markets about what those assets were along this security commodity line would certainly create confusion, regulatory uncertainty and potentially legal liability for any market participant who wanted to participate in some sort of uh innovative project or entrepreneurial project that involved those assets as it relates to the two market regulators. Very good. Thank you Mr. Miller Rathmemell and Mr. Tousar.
▶ 1:29:23what what effect does this confusion have on digital asset ecosystem and innovation? So, as I said, beyond the fact that we spent untold sums of time and money uh trying to guess at what the laws were and and even worse, what the laws would be in a few years since when you have it uh agency interpretations, right? It might change every four years.
▶ 1:29:46Even today, we just see um unless you are an absolutely huge, very wellunded team, you can't afford to take the risk of operating here. And so these upstart teams, the ones who are going to be the massive companies of the future, are choosing to go to other jurisdictions, whether it's in the Middle East or in uh areas of Southeast Asia, things where they aren't having to pay $1,000 plus an hour for a lawyer to tell them, "Well, I don't know what the law might be." I I would uh say something similar.
▶ 1:30:16Uh markets demand clarity um ultimately. And uh during this kind of very tumultuous period that we saw over the past uh half decade plus uh I was routinely approached by founders who were just trying to build their businesses including some projects that were building on Ethereum.
▶ 1:30:32And these are founders that shouldn't have to understand the nuances of securities and commodities laws, who are just trying to build projects here in America, and who shouldn't have to spend millions of dollars on legal advice uh from uh lawyers who don't have the uh don't have a legislative or regulatory framework that could they can actually reasonably interpret.
▶ 1:30:52Um and spending time with those founders and seeing them uh try to become you know arm trail lawyers uh felt like a great wasted opportunity because they were spending time doing that rather than building their businesses here in America. Very good. Mr. Tous any thoughts? Mr. Chairman I um I would suggest that one of the greatest impacts as to the competitiveness of the US as um as the hub for what we think is innovation for the future of uh the future of the internet, the future of payments on the internet.
▶ 1:31:22um and having that talent and that capital um move to jurisdictions. You know, the US is one of the only in the G20 that does not have clear rules of the road um as is proposed in this in this bill. And I think we're are we not to act with urgency? I think we'll continue to see that flight of capital and talent um overseas. Good. Mr.
▶ 1:31:46Davis, section three of the Commodity Exchange Act closes with its final purpose to promote responsible innovation and fair competition. How does regulating digital assets fulfill CFTC's purpose of promoting responsible innovation and fair competition in the markets? Because well functioning markets allows innovation to thrive. When the entrepreneurs know what the rules, I'm talking myself out of business, right? I'm saying not use the lawyers as much.
▶ 1:32:13When you don't have to use the lawyers as much, when you're spending more of your time innovating and less of your time trying to figure out what in the world am I allowed to do in this ecosystem, the innovation succeeds. And we've seen that since the passage of the Commodity Futures Modernization Act a quarter of a century ago. The types and differentiation and types of products that have been allowed to trade in CFTC markets have grown tremendously.
▶ 1:32:39A number of those products have failed, but the ones that succeeded have succeeded tremendously. And that's because the the the self-certification system and the core principal system creates an environment in which innovation can get to the top. Very good. Thank you, chairman. Gentleman yields back. The gentleman from Virginia, Mr. Vinman, is recognized. Thank you, chairman. Good morning, everyone. Like many of my colleagues on this subcommittee, I'm genuinely excited about the innovation and dynamism in your industry.
▶ 1:33:08Just last month, we heard from witnesses leveraging this technology in remarkable ways from modernizing cattle trading to advancing geospatial mapping. And one area I'm particularly uh interested in is the national security applications that are meaningful and significant. Uh but while these um the potential is substantial, the public also sees some elected officials misuse these term tools to scam Americans and enrich themselves and their political allies.
▶ 1:33:35That kind of behavior undermines public trust and taints an otherwise promising innovation. Even more troubling, it opens the door to foreign adversaries to influence senior US officials by purchasing large volumes of coins they promote or create. As a former White House ethics lawyer that advised senior White House officials, I find these actions deeply troubling, as do the American people.
▶ 1:34:00Um the American people recognize the president's scheme to profit off his own support for what it is and frankly there's a concern about emalments. So as each of you and as my colleague Mr. Lynch mentioned uh the foundation for your industry is trust. How are you currently building trust in um in assets? I'll start with Mr. Miller.
▶ 1:34:30So I think one of the great innovations that Bitcoin did bring to folks is, you know, we can talk about it being money, we can talk about being ledger, whatever. It's fundamentally that it allowed decentralized trust across the world, right? No matter where you are uh with very little um computing power to read a note or what you can agree on what the history of something was, you can you can agree that hey going forward this is what we believe.
▶ 1:34:54And I think being able to have that on a borderless basis and create trade and interaction and communication across the world like that is an incredibly powerful trust building primitive uh that we haven't seen before in a way and I think using that to allow for transparency and interaction uh is one of the most powerful things we can do for a global economy going forward.
▶ 1:35:18So I just want to on that point I think it's important to distinguish between transparency which I think is very much there and then trust which is more foundational and goes to the question of whether they're conflicts of interest or where is that where is investment going. Um, Chair Benham, uh, do you have any comments on how do we build trust in digital assets and, um, specifically how do we ensure that there are no conflicts of interest?
▶ 1:35:45Um, to the earlier question about, you know, financial conflicts of interest from, uh, um, members of the government. Thanks, uh, Congressman. And, uh, ultimately the trust is going to be built with a regulatory system in place. And that trust as I mentioned earlier to Mr. Lynch around our traditional markets exists because of a comprehensive regulatory system which many regl is burdensome.
▶ 1:36:15It is a challenge but it ultimately creates a level playing field and one where market participants can trust that there's a system of transparency where there are no conflicts of interest which is a core principle in of itself.
▶ 1:36:29So I do believe the step that these committee the committee is taking towards a regulatory system will be a step towards building trust and over time as markets become transparent as they become what US investors are accustomed to and the protections that they've uh afforded and ultimately you have the rule of law and enforcement on the back end if you do have bad actors and you will have bad actors the trust will gradually grow and I do think there will be symmetry
▶ 1:36:59between what we've experienced in this country over a hundred years with our financial markets and what the potential is in digital assets as well. Thank you. I think one of the important points here is the fact that u conflicts conflicts of interest has to be part of the regulatory regime to make sure that we maintain trust and that frankly um the trust that is being developed now in digital assets that have a promising future is not undermined by conflicts.
▶ 1:37:27something completely outside of the control really of the industry um and uh sort of uh uh prevent the growth of this industry. So uh with that I yield back. Thank you. Gentleman yields back. Uh the gentleman from Tennessee, Mr.
▶ 1:37:42Rose is Uh thank you chairman style and thanks to chairman Johnson for holding the round table today and thank you to our witnesses and please know that your uh your participation today I think will be uh will prove to be very helpful as we go about the work of trying to figure out how to fill in the gaps uh in the regulatory framework in this space.
▶ 1:38:04I am fortunate enough to sit on both the financial services and the agriculture committees and have seen firsthand the level of coordination needed between the committees to get digital asset market structure legislation out the door. This partnership is telling for two reasons I believe. One, it demonstrates Congress's commitment to providing the digital asset ecosystem regulatory and legislative clarity.
▶ 1:38:31and two, it signals the need for the regulators uh under each committee's jurisdiction to work together as well. Mr. Davis, while you were at the CFTC, was there ever a policy issue that required such coordination between multiple congressional committees and your I guess I'm not aware of particular policy, but I know that I know that the chairman that I served under, Chairman John Carlo and Chairman Tarbert were actively talking with uh Congress and with their counterparts at at the SEC.
▶ 1:39:02I know there was engagement among the commissioners. I know there was engagement among the uh divisions of enforcement and some of the other divisions. So, I know I again I don't know if there's civic policy, but I know there has always been an active amount of engagement between both of the agencies and with Congress. And Mr. Mr. Davis, do you agree that the SEC and CFTC must work together in order to adequately oversee this this space and and tell us if you will maybe one or two of the key challenges uh with regard to such a partnership?
▶ 1:39:31Uh absolutely that that coordination is critical. Uh I think has been alluded to already. One of the complications in the in the 50-year relationship between the CFTC and the SEC is sometimes uh not having a full understanding of where the line is between the jurisdiction of the two agencies. Right? I've spent an inordinate amount of time in private practice advising clients and litigating the SEC on that very question.
▶ 1:39:58uh and so I think uh where where Congress can provide an enormous amount of benefit in this space is as precise and specific delineations as possible between the jurisdiction of the SEC and the CFTC. As I noted in my opening remarks, I think section 202 of the draft bill is a good example. Right? I think it's pretty clear when you're reading that that there are a host of secondary market transactions between third parties that the bill would place within the CFTC's jurisdiction pretty clearly.
▶ 1:40:28Those types of provisions from Congress are critical because whatever Congress passes, there is going to be some edge cases where the CFTC and the SEC either don't agree or have difficulty getting to agreement.
▶ 1:40:42And so the more precise, the more quantitative like the the Congress has done with security futures, you know, the more, you know, accurate um wording that you use, the less opportunity there is for fights between the agency to happen in the future. There's going to be disagreements, but Congress can do a great job in this bill of really narrowing the area of disagreement by making as clear as possible where those jurisdictional lines are.
▶ 1:41:11And I know we want to do that, but as I'm sure you appreciate, the more specific we are, the greater the potential that we wall off the opportunities for future innovation that might be beyond those rules. So, it is kind of a delicate balance to strike. Uh, and we we appreciate your input. Many traditional financial firms have expressed interest in becoming involved in the digital asset ecosystem. I talk to these businesses on a regular basis.
▶ 1:41:38A key objective of any digital asset market structure regulation should be in my view to put these more traditional entities on an equal playing field with the crypto native firms. Mr. Davis, what is necessary from a regulatory and legislative perspective to create a level playing field for traditional as well as new market entrance?
▶ 1:42:02Uh I think I think uh again clarity right so that the so that smaller entities have an easier time entering the you know the the ecosystem. I also think you know the CFTC registration system right now for for current registrants uh you know is is clear about what you need to do and not to do to get registered with the CFTC. I think you know applying that same type of uh registration principles and coming up with a process that is efficient.
▶ 1:42:31Uh it's important that registered in a you know that that those registrations not be delayed right because delay impacts the ability of certain participants to weather that process and to be able to get registered. So it's it's important to have an efficient process uh where uh you know any any type of restaurant who can satisfy the core principles is allowed a registration. Thank you and thanks to all of our witnesses and I yield back Mr. Chairman. Gentlemen yields back.
▶ 1:43:00The gentleman from California, Mr. Licardo is recognized. Thank you, Mr. Chair. Thank you to all the witnesses uh for sharing your insights and I appreciate uh learning here. I um I I do join in the frustration expressed by a ranking member. We can't ignore the elephant in the room. Uh there is an imolence clause in the constitution for a reason. There have been anti-bribery statutes for decades for a reason. Uh and since apparently we need more.
▶ 1:43:29I introduced a couple months ago the modern emolements and malfeasants enforcement act which is HR1 1712. And I encourage my colleagues to join as co-sponsors and join the couple dozen folks who have already joined in uh because apparently we need a law to tell the president and other federal officials that they cannot get engaged in issuing uh digital assets or commodities or securities or or anything else. That of course would have been obvious to any of us before any of us ran for office.
▶ 1:43:58Uh I I'd like to get to uh the gist here because I think there's some really important testimony and we obviously just saw yesterday first time a draft uh a very important legislation that I know we'll be considering in a matter of days uh for markup and I I guess chair Benham can I ask if you had a chance to review the draft? I know it's it's quite lengthy. Yeah, Congressman, thanks for the question. I I think I received it about three or four o'clock yesterday. So I did review the section by section and I went through a little bit of the text.
▶ 1:44:27So I I have a general idea, but there's more work to be done. I I won't hold you to the detail, but you mentioned six recommendations in particular in your testimony. Appreciate that. Um the u the anti-moneying lendering, the KYC, the customer ID program. Based on your review, do you believe that this draft addresses some of those core concerns?
▶ 1:44:48Short answer is yes because giving the authority to the CFTC um to register some of the intermediaries in the digital asset space in a traditional way that are based off of the core principles of the commodity exchange act would mandate and permit also the CFTC to create a regulatory structure that does all that I've said and that you repeated around AML, KYC, CIP, cyber, conflicts of interest and other very important core principles.
▶ 1:45:16Are there any shortcomings or gaps that you believe need to be addressed? At my first reading in terms of the core principles and how they would apply to the digital assets, there are no major gaps. There are some other issues that I probably identified that I think are worth a conversation. But with respect to your specific question, nothing glaringly stood out at me as I reviewed it last night.
▶ 1:45:36Then with regard to the other five recommendations, was there one or two that that uh stick out that you think we need to be attending to as we're considering a markup of this draft? Well, ultimately the thing that concerns me is and I I mentioned this in my written testimony and oral testimony as well. Um we have these two market regulators and they have historically functioned quite well together um over many many decades. Um it is not an ideal situation I understand for reg.
▶ 1:46:07Um I suggested that you have dual registration in many circumstances in traditional securities markets and and uh derivatives markets. I don't think as much as there will be people who oppose this path I don't think it's one that we want to stray from. um there will be circumstances where participants in the digital security space and the digital commodity space should be dually registered.
▶ 1:46:32If you don't go down that road and the exact words I used is if you have a model where there's um a deferral or a notice filing to another agency, you create gaps and the market will then start to observe and identify these gaps and exploit those gaps.
▶ 1:46:48So it might be hard to imagine what those circumstances are precisely today, but given my experience, I have no doubt that if there are situations where there's not comprehensive exclusive licensing authority for each agency in their distinct jurisdiction, you may be creating unintended risks that will ultimately come back to hurt us. Mr.
▶ 1:47:12two sorry you think about Coinbase's uh many customers uh do you share the concerns of of Sher Benham about the the possibility of those gaps existing that in ways that could harm uh investors? We do worry about gaps. Yes. And um thank you for the question Congressman.
▶ 1:47:30Um in addition however I would say we also worry about the fact that digital assets are unique in that unlike futures and equities um users may not distinguish between what's a what's a digital asset commodity and what's a digital asset security and you know the various forms of token classification that the bill lays lays out very successfully.
▶ 1:47:54And therefore from the end users perspective we think it's important that these two regimes are as harmonized as possible so that the same sorts of protections are afforded because that would be that would be sort of the expectation of of those that are using digital assets. And so to the greatest degree possible while respecting the the unique lanes that each agency lives in to the degree that the mechanics of how trading and custody and those sorts of things can be harmonized.
▶ 1:48:22I think that will be critically important for the bill. Thank you, gentlemen. I yield. Gentlemen yields back. The chairman of the Financial Services Committee, the gentleman from Arkansas, Chairman Hill, is recognized. Well, thank you, Chairman Style, and thank you again for your joint leadership of this effort.
▶ 1:48:37You know, under the Biden Harris administration, the the SEC used a whole wide range of interchangingly and interchangeably terms for digital assets confusingly interchangeably terms uh that were uh arguing that most of them were not secure themselves were not securities creating a lot of legal uncertainty. I mean, it just went around and around.
▶ 1:49:02I felt like for four years we went around in circles on that and the lack of clarity made it practically impossible for any market participant to uh come in and register under the rules at the SEC. It was confusing to Congress. It was confusing to law firms made a lot of money for law firms I assume here in Washington D. So in light of all that confusion, uh, market participants develop processes to analyze and classify assets under their own rulemaking.
▶ 1:49:32And so Mr. Tousar Tusar, you've certainly are one of those at at Coinbase. You all created your own listing standards and can you explain how you navigated that as a public company and a registered firm? How did you navigate that listing process? Yeah, thank you for the question, Chairman Hill. I um you know Coinbase has uh today a very rigorous listing standard that looks at a variety of qualitative and quantitative factors.
▶ 1:49:59We uh have listed approximately 300 assets for trading on our centralized exchange out of the thousands and thousands that uh that we evaluate. So we have about a 90% rejection rate. The sorts of factors that we look at are um is it secure? Is the block is the underlying blockchain on which this is built secure? How does the asset fare under the our interpretation of the Howie rubric? Um is there an active development community? So there's a whole host of factors that we look at.
▶ 1:50:29Um and after that, you know, we look at is this an asset that customers want and uh and are asking us for and subject to those things, we'll go ahead and list it. But we have a you know, we have this standard in place that we've developed over a number of years and we feel uh you know, we feel very good and strongly How would you feel about if you know um not having uniform listing standards that you'd find in a regulatory framework approach?
▶ 1:50:57Has that hurt the ecosystems development? Has it driven business offshore? Has it you may be doing a good job of it, but has it been confusing and not productive for other people who are trying to perform an exchange type function? I I think it is one of the Thank you for the question. One of the most important elements of this bill is providing that clarity.
▶ 1:51:17Out of all of the things in the bill, the token classification is probably the single most important element because that is precisely to your point what will decide whether somebody feels comfortable and safe doing their project and development here in the in the US or we'll move it overseas. And so I think it is it is critically critically important.
▶ 1:51:36Would you say for global leadership in the US where on a biccameal bipartisan basis you know that it's important that we craft a regulatory framework and have a dollarback stable coin regime in the US? You think both are important? Both are critically important. Yeah. Which one is more important in your view big picture-wise for the ecosystem? Oh, that's a good question, Chairman. I um You don't want to be pinned down. I I think they are both equally important. Okay. I'll take that as a as a good answer. Mr.
▶ 1:52:06Rothell, uh Rothmeell, uh you've done so much work in the urge early emerging stage in in the digital asset space. Um how important it is to have a regulatory regulatory framework so that you know what the governance, token sales, and blockchain system rules are to you for all your emerging company. I can't imagine they even know what how to undertake their projects. How do you know what to invest in without a framework? No. Uh thank you, chairman. Uh you're exactly right.
▶ 1:52:35Uh this is the one of the great challenges we've run into in the space. I've advised companies uh for the better part of a decade in this space and I've never seen so many seedstage founders who are so curious about the current state of policy and legislation. Um and who are uh they probably could all take the California bar if they wanted to. Uh it's it's uh it's quite impressive, but uh but it's also distracting.
▶ 1:52:58It's incredibly distracting from founders who want to build the future of capital markets, the future of digital infrastructure, the future of financial structure, infrastructure here in America, um that they have to become armchair lawyers, uh and pay again millions of dollars in legal fees to try to make sense of the current law, which is inherently unclear. I appreciate the whole panel.
▶ 1:53:20Chairman Benham, so good to see you and thank you for your leadership on the commission and for your continued advice and counsel to our our members on both sides of the of the capital. With that, Mr. Chairman, I yield back. The chairman yields back. Uh the gentleoman from Maryland, um Representative Mlean Delaney, is recognized. Uh thank you, Mr. Chairman, and thank you to our witnesses again, uh for being here today. I found each of your testimonies really um you know illuminative and I'm really look forward to working more on this issue.
▶ 1:53:50Um as was discussed, we're in the middle of a digital revolution where assets no longer need to be physical to have value and this brings great opportunity and serious risk. Um especially with the anonymity of digital assets being exploited for potential illegal activities. uh fraud, uh volatility, scams, moneyaundering are all threats that an unregulated and unchecked system allow to thrive. And without oversight, we invite chaos in our financial systems and in harm's way.
▶ 1:54:19I am deeply supportive, however, because I sit on the ad committee of the innovation that digital assets can offer in so many different fields. Um, but I do have real concerns um um and in particular about the deep concerns about actors that are drawn to markets that lack a fundamental regulatory framework. And a lot can happen on the dark web, including human trafficking and moneyandering and other illicit activities.
▶ 1:54:46And that's why I think it's so important we have smart, nimble, marketdriven innovation regulations, not to stifle innovation, but to shape it, but to weed out bad actors, protect consumers, and ensure transparency and stability. So, I really um I have so many questions to focus on, but um I'm going to start with this first one about maybe some elicit financing.
▶ 1:55:09Um yesterday the financial services committee and ad committee released this draft bill to establish a regulatory framework and for mo both Mr. Bean and Mr. Miller, could you share any preliminary thoughts you had on what this bill does, right? And um how we can make sure it relates to anti-money laundering and where it could be strengthened.
▶ 1:55:29Um and just how prevalent are risky digital asset exchanges such as those that lack know your customer um CYC rules or or are connected to the dark web. Um and are there any lessons from the EU's Mika regulatory regime? So, sure. So, I'll agree with I think what Mr. Davis and Mean have both said in that uh giving clear authority for overall trading to the CFTC I think is a huge advancement here. Right.
▶ 1:55:59As we've said, regulatory clarity, sorry, regulatory or ambiguity, gives gaps that bad actors can exploit um and makes it harder for those who are trying to enforce the laws to actually get in and do that.
▶ 1:56:12So I think the the fundamental structure offered here of we are clearly making these as digital commodities and if you're very early on and need to pre-sale some of those in order to raise the funds to build the network that becomes uh under the SEC authority I I think that general concept we obviously want to uh we just got the bill so still working through some of the details there but I think that fundamental structure uh is very good and allows kind of the expertise when it comes to exactly the, you know,
▶ 1:56:42preventing bad actors from exploiting the system the same way that they do every other monetary system that exists, right? Like people, bad actors, especially like money. They're going to try and take advantage of anything that's there. And so I think by creating the really clear structure uh that's being proposed that we're talking about today is the number one thing that we can do to um to weed out bad to weed out bad actors. Thanks, Congresswoman. I'll I'll point out one specific thing because I suggested this earlier to an earlier question.
▶ 1:57:10There are within the core principles, a lot of the issues you raised which are critically important will be addressed just by default of what the core principles require. But from a CFTC perspective relative to other agencies within the US government, right, AML is a key one that I think would have to be uh more prescriptively outlined in the legislative text. Again, I haven't had a full chance to read through it, so it may in fact be there.
▶ 1:57:35But there was always a delta between the US CFDC and the Treasury Department within Fininsson and the authority that they have around anti-moneyaundering. Know your customer is very key component certainly at the federal level but also Mr. um Tusar mentioned the state level requirements that many of the intermediaries have to require uh that that follow.
▶ 1:57:54There are so many requirements along the state lines, but I say within the federal regime, um, AML is a key component where it can be strengthened within the market regulator uh, requirements. Yeah, that's great. Um, I'm going to, um, reference something that Congressman Rose said earlier about consumer protections and at level playing field.
▶ 1:58:14um you know creating safe harbors or special exemptions for digital asset risk you know is great but we could disadvantage players like community banks that do a lot of financing for for farmers in this new legislation discussion draft on digital asset market structure how can we make sure that there's an even playing field and again is there any lessons learned from the EU's structure um you know I I I'm diving deep and I I still haven't looked at all 212 pages yet so It's kind of I'm
▶ 1:58:44trying to figure out from you all how you all are seeing in terms of this um other competitors um and getting you know making sure that there's an even playing field. Congressman, just very briefly I would say in terms of your first question in level playing field. The co cognance of the time I'd ask maybe you just offer the you'll you can reply in writing uh to the to the gentleoman's question. We'll we'll reclaim the time. We just want to make sure we get through all of our questions here today.
▶ 1:59:11Um, we'll now recognize the gentleman that we see in stereo uh both with the portrait on the wall and here in the flesh, Mr. Lucas from Oklahoma. That is a lovely face on the wall, isn't it, Mr. Chairman? Thank you. I want to start with my good friend, Mr. Benham. Would the bill we're considering today appropriately account for the riskmanagement strategies of digital assets covered by both the regulators?
▶ 1:59:36And along that line, how should we think about cross margining for transactions under the CFTC and the SEC? Thanks, Congressman. Um, and I did mention this in my written testimony as a benefit of uh cross agency collaboration where I think the initial reaction is always burdensome duplicative regulation by multiple agencies is a challenge. Um, I think it's important to be comprehensive as I alluded earlier to Mr.
▶ 2:00:04Ricardo uh and I I think in balance we should lean towards comprehensive regulation to avoid those risks which can cause unintended consequences. That said to your question there are mechanisms within the two agencies like portfolio margining like other netting mechanisms that would able enable market participants to manage their balance sheets and their capital requirements if they have exposure to products that do have symmetries along risk lines. Continue you Mr. Mr.
▶ 2:00:34V, I'm on a related topic that's near and dear to my heart, setting on both the financial services and the ad committee. Should we apply this same logic to the clearing of US treasuries and their derivatives? We've discussed this before, but it's worth repeating. How can we incentivize clearing and making a more friendly regulatory environment, particularly for clearing of our most critical asset class? Thanks, Congressman.
▶ 2:00:58And you and I have probably had this discussion in the past and as the clearing mandate uh begins to roll out over the next 12 to 24 months if not sooner. Um clearing is a healthy component of market infrastructure. We learned that after the financial crisis in 2008 and I think that's a reason the SEC made steps in the Biden administration to mandate clearing. But we do have to incentivize it u and make sure that folks want to be in that market.
▶ 2:01:24uh we've seen high periods of volatility in the treasury market over the past few years because of COVID and some other uh sort of mini flash crashes and we want as many people in there as possible. Capital restraints are one of the biggest barriers to entry into the treasury market and I do think uh what you suggested different mechanisms to allow netting across different products whether it's cash and futures or otherwise will create incentives but also if well thought out will also be protected by smart regulation and not create unintended
▶ 2:01:54consequences. Absolutely. Turning with my remaining time to Mr. Davis. In my view, the draft we're considering today is a good start to creating a simple regulatory framework for digital asset markets. However, even the most simple framework must include clear avenues for market participants to get technical assistance and feedback. And that's why my bill, the Securing Innovation and Financial Regulation Act, codifies lab CFTC and the SEC's Finnhub.
▶ 2:02:21Both of these offices make the commissioners more the commissions more accessible to market participants and foster fintech innovation. Mr. Davis, can you speak to the benefits for market participants of having a responsive and accountable Yes, greatly beneficial. Um, Lab CFTC is near and dear to my heart. when when chairman John Carlo created lab CFTC, he had it report to me as the general counsel uh which was a great benefit to me uh and and I think to the agency.
▶ 2:02:51Uh it was eventually moved to to report to the chairman and then and then chairman Benham made it the the office of technology innovation I believe. So that's been a great uh progress across administrations. And so I'm a I am a big advocate of having a portion of the agency being uh focused on innovation and focused on engaging with the public. Uh during my tenure at the CFTC lab, CFTC met with hundreds of people uh who were interested in the CFTC space. They were interested in fintech. They were interested in digital assets.
▶ 2:03:21And you know, LAPS FTC didn't, you know, give advice per se, but was able to to give information and to give some ideas about where, you know, entrepreneurs and other interested parties could go uh to help navigate um the uh you know, the the regulatory structure that we have here. And and again, that internal entity was able to advise the agency about what it was seeing out in the market. It was really an attempt to have uh help the agency have its finger on the pulse of what was going on with the public.
▶ 2:03:50So I think that type of outreach, that type of uh that type of activity is is critical for any agency. Seems like my bill might be on the right track. With that, Mr. Chairman, I yield back. The gentleman yields back. The gentleman from Alabama, Mr. Figures, is recognized for five minutes. Thank you, Mr. Chair, and thank you to the witnesses uh for your time here today.
▶ 2:04:10Look, I think we'd be remiss not to, you know, as we as we're seeking out uh answers and a pathway forward on further legitimizing um this very innovative industry, not to I think we'd be remiss not to to mention the impact that the president's own action in this space is having on these on these efforts when this should be um when this would be something that we can come to agreement on.
▶ 2:04:33But when we see the decay, the erosion of uh ethical standards and and and standard and norms of just acceptable conduct um from government officials, you know, using their position for for personal gain, that is that's that's dangerous. It is dangerous and it's not it's not helpful uh to what we're seeking to do in this industry.
▶ 2:04:55And I mean, can can you imagine can you imagine an environment where President Obama said that I am only meeting with people who buy my cryptocurrency? President Biden, can you imagine what the reaction would would have been? It certainly wouldn't be silence. It certainly wouldn't be just saying, "Oh, that's okay." Um, we cannot continue to go down this road. Um, certainly not at a time where we are on the precipice of of of doing something that is much needed. Uh Mr.
▶ 2:05:25Tuso, I want to start with you. Um in the absence of a um environment where we've had clear regulation, can you talk to me a little bit about the steps that Coinbase has taken? Um because I can remember a world where Coinbase was at the frontier of essentially begging for regulation in this space. Um and you guys have gone um I think above and beyond uh in terms of trying to enhance public uh confidence and trust and guard against scams and fraud. Can you talk a little bit about the efforts that Coinbase has engaged in over the uh the past several years in this space?
▶ 2:05:56Yeah, thank you for the question, Congressman. Coinbase, as you say, has been uh leaning into trust and compliance from its outset and using that to differentiate ourselves in a in a space that uh sometimes has been challenged in that regard. And that um that's taken a few different forms. Number one, um as I mentioned today, we're uh we are a um money services business under Fininsen. We've, you know, uh, apply the same KYC and AML standards that banks do today.
▶ 2:06:26Um, we are registered in any place that we can. Today, we operate a designated contract market with the CFTC. We're registered as a as a registered investment adviser with the SEC. And so, we've really leaned into wherever possible um, registering under the appropriate authorities.
▶ 2:06:45um and I think most importantly have been advocating um through policy efforts and others for federal level regulation precisely what you know this bill aims to accomplish and I think you know we're quite excited about the potential um that's you know for this bill to to pass and move forward with federal level regulation. Well thank you and we look forward to continuing to work with you guys.
▶ 2:07:09the, you know, one of the the benefits of uh cryptocurrency has often been uh financial freedom, access to financial resources, uh particularly for marginalized communities. It's something um that we consistently hear about um and consistently hope uh that we can further uh that goal.
▶ 2:07:26Can you guys talk to me uh about uh how a more clearly defined coordinated regulatory framework gets us closer to that end and making sure that we are expanding access of financial resources and tools to communities that don't typically uh have them or communities that typically face um you know significant barriers in accessing it and making sure that this is not just an industry that benefits Wall Street u but also hits the everyday person in in terms of accessing its full potential. And we can start um start left or right.
▶ 2:07:57No, thank you, Congressman. Uh it's it's a great question. Uh financial inclusion is uh absolutely part and parcel of um the promise that uh the digital asset industry has promised to bring um it's already had great success on that front. Uh I think most crucially uh and and looking at the uh the draft legislation today um is uh ensuring um that we uh bake in some of the core promises of uh of digital assets um as a technology.
▶ 2:08:26Um so disintermediation um between uh consumers um uh kind of free and fair access to open source software uh transparency auditability accountability um that's really how we're going to realize the promise of financial inclusion that this technology can bring. Mr. Miller. Yeah. The current, you know, gap in regulation and clarity has kept a lot of players out of the space.
▶ 2:08:53folks who do have existing relationships with members of the communities that you're talking about where if they were able to leverage those relationships, bring them, they would have uh let those members of those communities and the underserved communities get access to these. And so I think by creating clear structure for them by creating a clear set of rules, we're going to bring in a lot more players to the space, which obviously gives consumers a lot more choices to work with as well. Thank you. I yield back, Mr. Chair. Gentleman yields back. The gentleman from Ohio, Mr. Davis, is recognized. Uh, thank you, Mr.
▶ 2:09:23Style. Thank you, chairman. Thank our colleagues for sticking around and making the most of this um gathering. Uh, it's a shame it's not a hearing, and I hope we don't lose the momentum that we need to finally get something done in this space. Um, you know, I've been working since I got to Congress in 2016 to provide some form of legal clarity. We thought we had momentum in 2018 on the token taxonomy act to just define really one of the most fundamental questions. A bright line test for what is and what is not a security.
▶ 2:09:54It's crazy that we don't yet have that. I mean you think of a sport usually that's one of the first things that you do is you define well what counts as a score. You get it across the inline you get it across the goal through the net. Who finishes the race first? And that's part of why people love it.
▶ 2:10:09you know for sure even with that there's debate every now and then some umpires miss balls and strikes from time to time but we've added technology to make it almost impossible where as a viewer watching on TV you don't know whether it was a ball or a strike and batters have honed in on that in baseball but a lot of this space is more like modern art or interpretive dance where you know it's all in the eye of the beholder uh you guys have all developed uh your own tests and been able to operate in the market to
▶ 2:10:39some extent uh in the context where you've dealt with this uncertainty and frankly at great risk to you and your investors. Um so Mr. Tusar, as you've all kind of highlighted, getting this bright line test is vital. Do you think all five of you given the text that we currently have before us would apply that test and get the same answer? That's an excellent question. Thank you, Congressman.
▶ 2:11:05um the the token taxonomy and classification in the bill is is not really my area of expertise. My my answer, you know, my hope would certainly be yes. And my sense is this is a significant step forward uh from from what existed. Thank you, Mr. Davis. Do you feel having read the text that that everyone would get the same answer? Uh I think we'd be close. I think we'd be close. Hopefully, you know, we want five and0.
▶ 2:11:31I mean, we certainly, you know, don't even really like the idea with a with a sample size of only five that there would be a 20% risk of missing. Uh, so we'd love to see it be 50. And I I hope we continue to refine it so we're positive. Everyone's going to look at the same thing and get the same answer. So, I think that's the kind of clarity the market needs. That's what's going to attract capital investment in the space. And I think a lot of people really just moved on and said, "Yeah, I'm not going to risk uh all my stack over this." And you know, certainly uh you know, when you look Mr. Mr.
▶ 2:12:01Rathmemell um Andre Horowitz has done that to some extent and looked at other sectors and made comments about it. So I think one of the other things that has held a lot of interest is self-custody. I mean if you really just change who the accountbased relationships are, you really haven't radically changed the market. Um the tech is kind of interesting but the space isn't even really interesting without self-custody. Um, and I think about self-custody uh in in relation to the second amendment.
▶ 2:12:31I mean, the second amendment's uh widely known whether people like it or hate it. It says the right to keep and bear arms shall not be infringed. But think if it said the right to keep and bear arms shall not be prohibited. Think of all the layers that could be put onto that. So when we think about the text here today before us, it says the head of a federal agency may prohibit.
▶ 2:12:59Whereas my keep your coins act that I've introduced says the federal head of a federal agency may not prohibit, restrict, or otherwise impair. It doesn't say infringe, but it's essentially impair. You can't limit it. So one word prohibit versus impair. You think about the difference there. Mr. Miller, could you highlight what's at risk? with the inclusion or exclusion of one word. Absolutely. And it's not just the second amendment, it's the first amendment, it's the fourth amendment.
▶ 2:13:28Um prohibit is a much less protective term than impair, infringe, a bridge, any of those. Uh and I think we're talking, the entire point of what we're talking about with this industry is decentralization. And without the ability for people to run their own software, to self-possess their own assets in their own wallets, on their computers, uh we lose a lot of that decentralization. As you said, you're just moving to a different centralized authority.
▶ 2:13:57Uh and so to me, yes, it's absolutely critically important that we preserve the right um and access to self-custody um and the protections for developers who build those self-custodial wallets. If you are not actually holding on and possessing the private keys for someone, then no, you aren't controlling that, right? And you shouldn't be regulated as a custodian. So, those are important distinctions. I I I wish I had about a half hour of your time personally, but thank you for what you do and may God bless you all with great success. And I yield back.
▶ 2:14:27The gentleman yields back. We'll go from the state of Ohio to the state of Indiana. Mr. Mesmer is recognized for five minutes. Thank you, chairman. Uh the digital asset ecosystem in America is operating under a reign of terror as I think each one of your testimonies have pointed out. It's ironic because the heavy blanket of regulations litigation that are meant to protect consumers is suffocating the very innovation that can improve safety. Uh Mr.
▶ 2:14:50Tusar, can we agree that the enforcement of first approach to regulating digital assets uh has on aggregate been harmful to the digital asset industry in America? Thank you for the question, Congressman. 100% yes and I would I would uh you know it's also harmed competitiveness of America in the global stage. Okay. Thank you. And m Mr. Tousar also you drew the conclusion that uh that industry is incentivized to set up shop outside the American borders due to the current disjointed regulatory framework.
▶ 2:15:20What safety risk does this present for American consumers? Thank you for the question, Congressman. the you know in the end consumers want and should be afforded the same protections as they get today when they hold futures or equities or these sorts of things and bringing it to a into a federal level regime would would afford those protections where it today those don't exist and it's critically important. Thank you. And I agree Americans are always safer when regulations are built in DC not in the UI UEIE or Singapore or anywhere else.
▶ 2:15:50Um, as a principles-based regulator, the CFTC offers flexibility and outcomedriven compliance. The SEC on the other hand is a rules-based agency emphasizing a prescriptive compliance frameworks. This contributes to the regulatory tension in emerging markets like digital assets where we are still fighting to to figure out what's the best regulatory approach. Clear guid clear guidelines are without a doubt necessary, but we have to thread the needle. They can't be so prescriptive that they become obsolete as technology evolves.
▶ 2:16:20Mr. Davis and Mr. Rothmmell, I know it has been asked, but it's important enough to ask again in your in in your view is either the SEC or CFTC approach a better fit for regulating digital assets. So, in in as I noted in my comments, I think for the secondary market transactions and for a lot of the commodity market activity that's happening right now, the CFTC is the natural regulator.
▶ 2:16:44uh they already have a lot of experience in the area and core principles is very consistent with you know the growth of the digital asset market. I do agree that there are some circumstances you know initially in the development of certain coins that you may want to do a capital raising activity that type of activity is more within the purview of the SEC. Thank you. Are there specific uh needs for prescriptive rules and if so how can Congress best future proof those? Yeah.
▶ 2:17:13Um I mean I think uh you know chairman Benham talked a little bit about this with like anti-moneylaundering for example. Um AML quayyc is an important uh aspect of any regulatory ecosystem. So that might be an area where you might want to give a little bit more specifics about how to proceed.
▶ 2:17:29Um but I think a number of things like you know like like reporting and cyber security and operational resilience are the types of things where we need to uh have a a productive discussion with the industry about what the technology is and what the technology can do and only through that um you know mutually beneficial relationship can both the regulator the industry determine the best courses to meet the goals that a core principal regime has.
▶ 2:17:56And so I would I would I would heir on the side of flexibility uh at the beginning and then the you know the regulators have the opportunity under core principles to make more prescriptive rules if circumstances require as needed. Thank you Mr. Tousar. Mr. Davis earlier Chairman Johnson got each of you on record as saying the lack of a regulatory framework is a threat to consumers. Can you give specific examples of a risk consumers will face if the flaws in the current regulatory structure aren't resolved? Thank you for the question, Congressman.
▶ 2:18:26I I think we've referenced um consumer um asset protection. For example, the sorts of regimes both on the CFTC and the SEC side that clearly delineate the assets that belong to the customer and the assets that belong to the entity in the event of insolveny or bankruptcy.
▶ 2:18:43Those kinds of protections are critically important to uh you know engendering the trust that we've talked about quite a bit in this hearing uh and ultimately to you know to protecting consumers uh in the face of of issues and uh that's critically important. Thank you. Mr. Davis, anything to add? I don't have much to add. It's uh it's it's a part of both the SEC and the CFTC regimes for for vibrant customer protections. They take slightly different forms depending on the nature of the market.
▶ 2:19:12Um but you know for example giving the CFTC authority over the spot market will extend those customer protections to customers who want to buy you know Bitcoin and Ether and the other uh those other uh digital assets. Okay. Thank you. Yield back my time. Gentleman yields back. Uh the gentleman from Florida, Mr. Herodopoulos is recognized. Thank you, Mr. Chairman.
▶ 2:19:32I appreciate everyone coming in today and and once again highlighting the fact that we've lost four years of reality and we've uh the capital markets have gone elsewhere uh because of this uncertainty and it's frustrating as we go through meeting after meeting uh hearing the horror stories of the last four years where so many folks want to do business here in the United States and basically are turned away or led the wrong way uh by the previous administration.
▶ 2:19:56And I very much love the fact that the ad committee and of course our financial services committee is is working in tandem here to get things done as opposed to playing some politics which always happens in this building too often. Um that said I what would help me if we could just kind of go down the list and I I I apologize been kind of in and out of meetings today. Uh could you walk me through maybe just in a brief way it started with you Jims um when you were negotiating or talking with the SEC prior trying to figure out this reg regulation.
▶ 2:20:25Give me walk me through how much time you spent with each of the uh folks at the SEC and what they're telling you along the way and then what the end end result was. So if we could just kind of walk down that'd be great. Yeah. Uh so the history of the uh the industry's um engagement with the SEC is now many uh years, the better part of a decade. Uh and uh and and so I I think uh it has changed and evolved over time under various administrations.
▶ 2:20:53Um I can say that the challenge that we've consistently run into is um recognizing the need that the rules are not uh the existing rules are not a perfect fit for the industry uh and for the flourishing of this industry in the United States and um and in action unfortunately meeting over meeting consistent uh inaction to actually move the ball forward.
▶ 2:21:21I think one of the big challenges is that the SEC is built to deal with much larger, more established companies than the startups who are working here. And so, as an example, when you're company of our size, you don't talk to the SEC. Your expensive lawyers talk to the SEC, right? They don't answer questions really. They ask you questions. You have to try and interpret them.
▶ 2:21:38So it just means that every interaction you have even when uh and there's some obviously very good people at the SEC who try and work with folks but it just means that everything is weeks and weeks of turn tens of thousands of dollars for a single question when it comes up if not more. Um and it comes back to why I think we're asking for like you know purpose fit clear regulation instructions for these folks. They've made attempts such as with Finnhub to do this.
▶ 2:22:03But the more we can move to that so that you know the cost of engaging in this kind of process approaches that of a regggd uh exemption where you're you know spending $100,000 to do a deal instead of a what we experienced with the reggga where you're spending millions to do a deal like that's what it is going to take to bring back the certainty and predictability that entrepreneurs need to start their companies here. Thank you.
▶ 2:22:26Uh most of my interactions with the SEC over the past four years have been on the enforcement side in in defending uh crypto companies who either either approached the SEC about trying to figure out something or were, you know, met with a subpoena by the SEC. Uh so it's uh my clients have been spending a lot of money on their litigation costs as opposed to, you know, kind of developing regulatory um solutions to the types of puzzles that we have in this space. Thank you, Mr. Chair. Yeah, thank you for the question.
▶ 2:22:55the um our our experience had been one of attempting to come in and register uh really only to find that there was not a a path and that was years of attempting to find such a path and then pursuing um you know the litigation that we had.
▶ 2:23:12Um, I will say that that's changed quite a bit um now and there's more engagement which we're very grateful for and I think that engagement from the agency as we've also seen from the CFTC for for quite some time is critical to finding the right rules of the road and uh and creating the clarity that's needed. Thank you. Not sure I'm fit to answer this question uh perfectly, but I I will say congressman in response, you know, um this is a growing industry.
▶ 2:23:41Um and there are a lot of novel legal questions and policy questions and policy uh risk questions. So um as much as the uh past may have not been ideal, um I think it's encouraging the direction of travel for the committees and congress and I think providing this clarity is obviously critical for folks sitting at this table. But as I've said many times, my focus is always customer protections and market resilience and um I think that should be the priority of the committee as well. I appreciate that. And one last thing, Mr.
▶ 2:24:09Chairman, uh we we had a wonderful meeting last week with the CFTC and the SEC and some members of the Financial Services Committee has expressed concerns that you know that only the SEC can handle this new issue. I happen to think that the CFTC has the capability given the the work they've done of course in the commodities and handling billions of dollars. Is there any reservations anyone of you five have about the capabilities of the CFTC to handle um this type of issue? None. No.
▶ 2:24:40No. Congressman, I'm going to I'm going to add a little bit. I know we're out of time, but this is an important point and I did submit it in my written testimony, so I would encourage you if you have time to read it. Um it's more than just a question about resources and size, right? I I talked about this in terms of when there's a congressional mandate, appropriators appropriate money that is commensurate with the mandate.
▶ 2:25:04So if Congress does pass a law and the president signs it, the expectation should be that there will be additional funds. The the gentleman the gentleman's time has expired. You can you can offer more in written testimony. Mr. Chair, gentleman yields back. The gentleman from Iowa, Mr. Nun, is recognized. Well, thank you, Mr. chair and I want to say thank you to the bipartisan nature of this conversation. This is bigger than any one party. This is going to be the future of where our nation's going forward together. And so, thank you for leading the charge in making sure these conversations happen.
▶ 2:25:34One of the biggest challenges in the digital asset space, as we all know, is the overlapping claims of authority between both the Securities and Exchange Commission and the CFTC. Being a guy from Iowa, we know CFTC very well. As a member of both the financial services and the a committee, I think that we saw conflicts occur firsthand when the SEC under its previous leadership attempted to take control of nearly all digital assets and effectively sideline the CFTC. That's not how this is designed and it shouldn't be how it is going forward.
▶ 2:26:03So, I'd like to consider an analogy. My kids got a chocolate coin for Easter. And in this on its own function, it can also be like a commodity with a wrapper around it. Similar to corn or soybean on how it happens, it can then be traded when it has this wrapper around it like a security. When first offered through an ICO, a funding mechanism as it is, it's wrapped in a structure that resembles a security offering.
▶ 2:26:32The underlying ether in this case was still chocolate. But because of the rapper, Ether was part of a securities transaction at the time. In this case, the gold foil. This rapper now has come off for Ether and it's traded and functions like a commodity. I'd like to offer to this discussion, Mr. share that blockchain projects need the option to raise capital and grow.
▶ 2:26:57But the current landscape is still too complex and prior administrations actually only added to the confusion making the ability for this gold coin never to have come into existence if it had been left. Look, Mr. Tesler, you've been uh the vice president, you are currently the vice president at Coinbase. What are some of the key characteristics that distinguish the digital asset functioning as a commodity versus one that would function as a Thank you for the question, Congressman.
▶ 2:27:25Um I I will say that um not being a lawyer and not uh not really going deep on the sort of the exact interpretation of how we um you know it is it is not my area of expertise but my hope is that this bill makes clear um the distinction between those so that we can you choose the appropriate regime and and uh regulatory authority to apply. And would you agree that legislation would help with that coming out of this committee? Yes, Congressman. Absolutely.
▶ 2:27:53Chairman Binham, uh, we've had conversations before. I appreciate your service again on both sides of the aisle here, but your leadership at CFTC, uh, really help establish this in a lasting opportunity for us. Last Congress, we publicly discussed how ether was either a commodity or wasn't. Do you still believe CFTC is the right regulator to take Ether after its wrap back into the commodity space? Congressman, thanks for the question. And the short answer to that question is yes.
▶ 2:28:20You know, we we had discussions about some of the components of Howie and the decentralized nature of Ether and other tokens and ultimately that's where the line needs to be drawn. It's not a perfect analysis certainly with a 100-year-old test, but I do think as I said in my written testimony, it's a pretty durable precedent that we should base the the analysis on, and I do think the draft um bill does that as well. I would agree with you. Uh Mr. Mr.
▶ 2:28:44Rathol, you have identified here that the lack of a clear federal framework has driven developers to avoid launching new tokens out of fear that they'll be retroactively labeled securities by the SEC. Are you seeing any change now that the Trump administration has prioritized digital asset legislation? Thank you, Congressman. Uh we have seen um a change in the uh general attitude out in the market.
▶ 2:29:10I think there's a lot of hope, there's a lot of enthusiasm that there is going to be market structure legislation, but the rules have yet to be written. Uh, and so we really do need to pass legislation to provide that crystal clear clarity uh for founders to have the certainty they need to uh pursue token projects and And then, Mr. Tester, I'd like to go back here. when you're providing the CFTC with spot market authority uh given would that give your clients greater confidence to support US capital formation uh having it come back here to the US?
▶ 2:29:41Yeah, thank you for the question, Congressman. It absolutely would. I think that's exactly the sort of clarity, clear rules of the road that people would feel more comfortable and not um not at risk for uh being able to develop their projects and we think it's critical for you know US competitiveness going forward. So, Mr. Chair, what I'm hearing, and I think this has happened across the board, we believe that we have the opportunity now to bring digital assets back into the United States. We have the opportunity to create legislation that forms clear regulation.
▶ 2:30:10We have an opportunity to take a digital asset, in this case, chocolate, wrap it in a way that the SEC has a partnership so they can go capital and then still take it back to the CFTC so it can be traded in an effective way. I'll just say, Mr. Chairman, it's a pretty sweet deal if you don't ask mind me saying so. I really appreciate the committee coming forward on this. Thank you. The gentleman from I will present the candy to the chair for further review to be held in the record. Uh the gentleman from Montana, Mr. Downing is recognized. Thank you, Mr. Chair, and I'll share in that chocolate as well.
▶ 2:30:39Um thank you uh Mr. Chair for holding this and thank you for the witnesses for being part of this uh incredibly important round table. I really appreciate your time here. You know, I also sit on the capital market subcommittee and we spend a lot of time talking about how to raise uh capital, how businesses can go public, a lot of that, you know, a lot of that sort of stuff.
▶ 2:31:01And unfortunately, the uh Gendler SEC made it really difficult for um innovators and entrepreneurs to to raise capital, especially in the you know, digital asset space. And uh Mr. Miller from, you know, my home state of Montana. Thank you for being here. I'm going to start off. I I know you talked about a little bit before, but I'm just curious. Uh, if you were to do it again, would you do another reggg a offering in this environment and and why or why not?
▶ 2:31:31Thank you for the question. Sorry. Thank you for the question. And uh we would not opt to do that. So, as I mentioned during my opening statement, we ended up likely spending more on all of our compliance with the reggae um the filing uh the ultimate investigation by the SEC than we actually raised from it. So, there's there's really no way to do it. And this is what does have me hopeful about what we're seeing in the bill that came out is that's exactly what we tried to do, right?
▶ 2:31:58Let's do a uh an offering and then decentralize the network and it becomes a commodity. And it's when we tried to take that step because there was no framework because there was no basis in the law for it. We were just left to the whim of the interpretation at the SEC whose response was, "Let's launch an enforcement investigation and cost you another $3 million." Do you think it'd be helpful if Congress created a specific digital asset exemption? I think there's no other option than for Congress to create a specific digital asset exemption. Thank you.
▶ 2:32:28Um I'm going to go to Mr. Wrathmill. Um the previous administration sought to treat every uh digital sorry I'm looking the wrong way every digital asset regardless of its purpose as a security and actually as a former regulator this would it made it difficult for me as a regulator you know somebody was mentioning the how howy test earlier you know and just uh understanding that and and the ambiguities of actually running a business and not knowing where where that bar was I I I think is incredibly uhred incredibly
▶ 2:32:59disadvantageous. for digital assets in in in the space and I was hoping you could explain to me why it's a bad idea to treat every digital asset the same. Thank you for the question, Congressman. A digital asset is ultimately a computing primitive. Uh so uh much like the uh chocolate point example, um the wrapper can contain uh many different assets. It can it's multimodal. It can evolve over time.
▶ 2:33:27It has many different attributes and therefore uh having a uniform application is a uh undermining the promise of the asset class and b making it absolutely impossible to comply with the law. So would that promote or hinder US innovation? Having regulatory clarity would promote US innovation. Absolutely. Thank you. Uh Mr.
▶ 2:33:50Tusser, you know, many digital asset skeptics have expressed concerns that consumers and investors are at a heightened risk of being scammed or losing money in the crypto industry. At the same time, many crypto companies have stayed away from doing business in the United States due to opaque regulations. So, would consumers be better protected if more digital asset companies were encouraged to do business with some common sense consumer protections in the United States? Thank you for the question, Congressman.
▶ 2:34:21There's no question that it would be the case that there'd be more confidence in more consumer protections if you know something like the bill under discussion here were passed and we had clear rules of the road for federal level regulations and importantly for federal level regulations. I think it's important that we get this right, that we're innovating in the United States of America, that we make it uh clear what the um uh where the bar is set when digital assets are coming and make it clear, you know, how it's being treated in a regulatory framework.
▶ 2:34:50So, I really appreciate you all uh sharing your perspectives uh with this uh I'll say round table for, you know, not sure what to call it at this point. I I appreciate I think this is an exciting time in the United States of America to create some clarity so that we can innovate and make sure that people understand you know what the rules are the rules of the road are so that we continue to grow obviously this incredible opportunity for us. Uh so on that I yield my time. Thank you Mr. Chair. Gentleman yields back. The gentleman from Illinois Mr.
▶ 2:35:20Foster is now recognized. Thank you uh Mr. chair and to our witnesses and my apologies for I had to calm a set of scientists who are pretty much panicked at what's happening in our scientific enterprise in this country these days. Um, you know, when I have described to my staff the 212page bill under discussion, it it strikes me as more or less 212 pages of regulatory arbitrage that, you know, when I talk to foreigners about foreign financial people about the United States, they think
▶ 2:35:50it is frankly insane that we have uh two two regulators, CFTC, SEC, that often end up regulating indistinguishable products or almost indistinguishable products with endless time wasted in courts trying to split hairs on this. This does not happen in countries that have a unified market regulator.
▶ 2:36:10And when I first came to Congress, geez, 17 years ago, I read this big blueprint for financial modernization by I think it was Hank Pollson and and friends back then and you know, high on that list uh where references going back to the past of the need to merge the regulation of the two operations. And it strikes me that crypto may be an opportunity to begin that.
▶ 2:36:33that even if you believe that the path towards formally merging the regulators may take decades to complete that there may be an opportunity to make a unitary crypto regulator that is a joint project of both joint product of these committees and that would actually um allow a single point of contact for crypto startups which is one of the things they claim they complain to me all the time and I'm sure they complain to everyone else.
▶ 2:37:00So, I was wondering, I'm sure you've all heard of proposals of various kinds to do this, and if you could just sort of go down the line and describe what are the aspects of that that you think might be feasible, might be attractive, and any advice you'd have uh to members of Congress that would might be interested in finally listening to the advice we've gotten from everybody for the last 30 years and and starting down this road. So, if we just start on the left and march down. No, thank you, Congressman. It's a it's a very thoughtful question.
▶ 2:37:30Um you're absolutely right. There's incredible fragmentation uh both at the federal and state level in terms of our market regulation. Um I I can't speak to the uh particular uh opportunity over the coming decades to merge the SEC and CFTC or other federal uh market regulators.
▶ 2:37:50But what what I can say is that uh digital assets are in many ways kind of a forcing function to unify regulation in that our belief at Han Ventures is that uh digital assets and blockchain technology will be the underpinning of the future uh capital markets, global financial system and the consumer internet.
▶ 2:38:10And so there is uh very much a unique opportunity here to um through the unifying nature of this technology um bring some unifying principles to the market but principles not an organization that doesn't give you a single point of contact if yeah John, go next. Yeah, I think the, you know, the clarity and simplicity is the biggest thing I'd ask for there.
▶ 2:38:35I think there's other folks here who are much more experienced on the internal workings of agencies and how to maybe best set it up. But I think as long as whoever is designated as regulator has the expertise uh to understand the crypto market and what uh what they're dealing with and looking at and I think understands the importance of again we're not talking about these large public companies with a billion dollars a year in revenue who can afford 10 million a year in compliance cost.
▶ 2:39:01We're talking about people who maybe raised a couple million dollars, you know, or even bootstrapping it and where the compliance cost and and the engagement needs to be in the five, maybe six figure range. Uh, as long as whatever setup we come up with hits that, I think that's the most important thing. Yeah, Mr. Davis.
▶ 2:39:22It's very tricky because both the SEC and the CFTC have different regulatory philosophies, different mandates, uh different organizations and different areas of focus. And so I know this idea has come uh it it it seems to recycle uh all the time and it's it's worth discussing.
▶ 2:39:41But as as someone who's been in the middle of the CFTC and has, you know, worked with the SEC on a number of issues, it's it's it's very difficult for me to see practically how the how the mergers of of those two agencies would be accomplished without a lot of unintended consequences.
▶ 2:40:02Congressman, I um you know, I'm not sure that I um have a lot to say on the benefits of merging the two, but I would reflect back on the um my remark at the very opening in my statement, which is this bill is a once in a generation opportunity to think from first principles about all of our market structures, be they on the CFTC side or the SEC side.
▶ 2:40:25digital assets today in the way that they settle for example and the real-time nature of their settlement means that we don't have credit risks and other things building up in our system and the way that um our current market structure on both the equities and the future side are intended to deal with and I think that's a that's a once in a great while opportunity to think from first principles about how we you know create um consumer protection fair and orderly markets and all these things taking
▶ 2:40:55advantage of some of the real efficiencies of of the digital asset Congressman, I think um you know it's easy to make a comparison across borders about why we are unique relative to other jurisdictions, i.e. having two market regulators. Some even have a single central bank and a market regulator. But the missing factor or assumption there um is that there is a distinct comparable size in markets.
▶ 2:41:22And that's what truly sets America apart and why two market regulators are critical. Adding to what Mr. Davis said, if you look at the size of the securities market alone and the derivatives market alone, they are by multiple factors greater than any other jurisdiction in the world.
▶ 2:41:40So merging the agencies or any suggestion otherwise which wouldn't surprise me for a reg to s suggest that I think and I believe pretty strongly given my former role would be a disservice to the American public and investors. Okay. So it will just persist for another 30 50 years until we have another really big crisis that we can't let go to waste.
▶ 2:42:02when during DoddFrank, we got rid of one banking regulator and that was uh that was sort of the limit of what we had political muscle to do. Okay. Well, anyway, thank you for this. Thank you very much uh Mr. Foster. The gentleman from Ohio, Mr. Taylor, is recognized for five minutes. Thank you, Chairman Style and Chairman Johnson for holding this hearing today. And thank you to all the witnesses for your time and insight and sacrifices to be here.
▶ 2:42:30must say I'm uh I'm struck by what happened here today. Um our Democrat colleagues have uh made serious allegations about the president's misuse of cryptocurrency and their solution seems to be sabotaging a hearing dedicated to establishing a framework to prevent abuses in cryptocurrency. If they believe President Trump is wrongly benefiting through malfeasants, surely it would be their duty to do all they can to advance a regulatory framework so that it doesn't happen again.
▶ 2:42:59Apparently, it's not that urgent. I've lived in rural southern Ohio my entire life. When I decided to run for office, I did so primarily because I wanted to help enact policies that would spur economic growth across the country and particularly in the communities I represent. As a small business owner, I ran into several regulatory and bureaucratic hurdles that impeded growth due to, in my opinion, overregulation. Mr. Mr.
▶ 2:43:23Miller, in your testimony, you mentioned how in uh in Hero's case, efforts to comply with unclear digital asset regulations ended up being extremely timeconuming and costly. Uh can you tell us where your uh resources and time might have been directed had those uh those hurdles not been in the way? Yes, thank you for the question, Congressman. You know, fundamentally, we are a developer tools company, right? We build the infrastructure and the tooling that builders need in order to go build this next generation of technology and applications.
▶ 2:43:54And so every dollar of ours, every hour of ours that got spent on sitting in room with rooms with lawyers and trying to guess at what the law might be or what it might become one day was just one more minute we couldn't spend trying to enable folks to build. Got you. Mr. Wrathm, the United States has long been a pioneer in innovation and entrepreneurship. In order to continue to be a leader in this place, we need to create an environment that is both an attractive place for startups and one that encourages our best and brightest to take risks.
▶ 2:44:24Without a clear framework, it sounds like the US is in danger of falling behind the rest of the world. Can you speak more about how you think entrepreneurs and innovators will respond if the United States continues without a regulatory framework? Uh, thank you, Congressman. It's a it's a great question. Uh my primary concern would be that we have already seen a um plight from the United States as uh the premier market in in innovation um and that without correcting course that uh that we would see further flight.
▶ 2:44:54Can you tell a tell me a little bit about what other countries have done with their regulatory framework that encourages innovation in the digital asset industries? We've seen in uh in the EU uh and we've seen in the UK uh and we've seen in in other jurisdictions that they've uh moved quickly uh with a unifying framework um that is workable uh that uh works for uh token launches uh addresses consumer protection, addresses market integrity. Um and it's the uh the inaction I think in the United States that has caused so much trouble.
▶ 2:45:24Thank you. Any framework that we put into place for digital assets will likely require the cooperation of the SEC and the CFTC as we discussed a few moments ago. Uh Mr. Davis, what are some examples where the SEC and CFTC have had to work together and what lessons can we learn from those experiences to apply to market structure legislation in the digital asset space? An excellent uh example is security futures. That was a new product that came online a couple of decades ago.
▶ 2:45:53uh and it wasn't clear from you know uh statutory text uh on which side of the line was. Uh in that circumstance the then two chairman of the respective agencies got together uh and hammered out a mostly quantitative process for determining when a a a future was just a future and subject to CFTC jurisdiction and when something should be considered a security future and subject to both um agencies jurisdiction.
▶ 2:46:20uh that was the Shad Johnson accords that was presented to Congress and Congress implemented that. I think that's a great example of success of the agencies working together to come up with you know a clear and there's still debates about you know some some aspects of that test but a lot a lot of that test is you know it's very clear one way or the other whether you're meeting one of the standards or not and so the agencies have certainly shown that I think you've also seen that early on after DoddFrank both agencies had to do a lot of joint rulemakings in a very short period of time
▶ 2:46:50I was not there at the agency at the time I'm told it was an incredibly busy period uh And there was a lot of work with the SEC. So the the the agencies have definitely demonstrated uh the ability to work collaboratively together. Uh it helps when you get good marching orders from Thank you. And thank you to all of you. Chairman, I yield back. The gentleman yields back. The gentleman from South Carolina, Mr. Timonss, is recognized for five minutes. Thank you, Mr. Chairman. And I want to thank all of you for being here today.
▶ 2:47:17It's unfortunate that our colleagues across the aisle have not made full use of this time. Um I'm glad that we have not wasted your time and that we have been productive with um this not hearing roundt today. U you know it's really important because your insights are essential as we work to pass a comprehensive market structure bill for the digital asset sector. Today I want to highlight the transformative potential of blockchain technology not only in reshaping our financial systems but in redefining how we interact with government itself.
▶ 2:47:45For that innovation to take root and thrive here in the United States, we need clear, effective legislation that puts an end to the regulatory uncertainty developers face today. For too long, digital asset innovators have taken their business abroad to places like Hong Kong and the EU and they have clearly defined rules um and other jurisdictions with more favorable regulatory environments such as the Caribbean or the Middle East.
▶ 2:48:08Uh but now for the first time the industry has a chance in the White House and we have a reality providing the clarity and oversight needed to protect consumers and ensure market integrity. And I want to reiterate this is not a partisan issue. Republicans and Democrats have been working on this for years and we are ready um to get get the job done. I'd like to start with you Mr. Rathmau.
▶ 2:48:34In your testimony, you've stated that clarity isn't about giving digital assets special treatment, but rather about establishing a consistent set of rules so they can build. In your view, how does the absence of clear legal frameworks hold back in reference to theation space? No, thank you, Congressman. It's it's uh it's a great question.
▶ 2:49:03uh the primary way in which it uh hinders uh the American innovation is that it's a misallocation of time and resources. Uh we have we have seedstage founders. Um I've also represented many seedstage startups outside of the crypto uh crypto industry.
▶ 2:49:19uh and uh those founders are not spending their days and nights worried about enforcement actions, concerned about the regulatory framework and on the phone uh hours and hours and hours with very expensive lawyers trying to read the legal tea leaves. Uh and so that m misallocation of time away from building products that consumers and enterprises are using, away from thinking about how they can be innovating and bringing value to the American uh market.
▶ 2:49:49uh is uh it's waste.
▶ 2:50:23Well, certainly digital assets can take many forms and functions as we've uh talked about at length today. Um, I think one of the greatest challenges in moving these uh pieces of legislation together is going to be uh ensuring that all of those different use cases are covered under a reasonable framework that's applicable to the use case of that digital asset. Thank you.
▶ 2:50:48in the process of passing laws and regulations to govern digital asset markets across many countries how they treat finance or for example in EU UK and Hong Kong they've all chosen Mr. in your view. Uh yeah, so the uh and thank you congressman.
▶ 2:51:13It's uh the DeFi space is a particularly interesting and complex corner of our industry. uh DeFi. The uh interesting element of DeFi is that um it's really a realization of kind of one of the core promises of crypto which is that it's fundamentally a disintermediated technology.
▶ 2:51:34Uh and the um existing kind of uh global market regulations really do focus on uh generally focus on intermediaries as uh you know core regulatory hook. Uh and so addressing DeFi uh on its own uh grounds and making sure that it has the space to flourish uh and actually generate the uh incredible value that it can for consumers and uh and the public and enterprises is is very important.
▶ 2:52:11Chairman microphone issues here. Gentleman yields back. is would Mr. Stsman like to be recognized or would Mr. Moore like to be recognized next? I know the the gentleman, Mr. Stsman is recognized, Mr. Chairman, and thank you to uh the witnesses here today, your expertise and and sharing with us uh your your perspective and testimony. Um you know, as has been mentioned, this is obviously I think one of the issues that could be bipartisan.
▶ 2:52:41Um and uh if there's anything that's new to Congress, this is one of those issues that's kind of new to all of us and we're trying to understand and uh wrap our heads around uh the direction of of a very exciting technology and very innovative and important to um not only the United States but to the world.
▶ 2:52:59And this is a an amazing um piece of uh of technology economic development tool to uh to emerging countries, others around the world that are truly trying to find issues. Of course, government that in other parts of the world that that are just frankly criminal that this could be.
▶ 2:53:26So I appreciate um are discussing today. So I'd like to talk just in your testimony to update the system. Um you mentioned u in your testimony that the legislation would be the foundation established by FIT 21. Then he said the effort should clarifyations defining which commodities and empowering.
▶ 2:53:56I mean we talked about this a little bit the other day in another meeting but these are really I mean it's it could be both right. I mean it depends on how you want to use the tool. What are some of your thoughts further on how do we uh clarify you mentioned other would you suggest um or any other Thank you for the question
▶ 2:54:28Congressman for assets is probably the single most important thing that we do for members and you know gives um uh confidence in uh in Coinbase. Um you know I I think that some of the other issues I think the number one most important thing to come out of this bill is the token classification and so we're excited for uh as the um provide the necessary clarity um going forward.
▶ 2:55:00All right. Thank you. Thank you. I guess I'm having some mic issues here. Um, jump back to Mr. Miller. Um, capital raising is a is a critical component of both the traditional securities market uh markets and the digital asset ecosystem. Um, in the traditional securities markets, investors provide capital in exchange for legal claims to ownership, repayment or income streams.
▶ 2:55:27Um, in the digital asset ecosystem, do investors receive the same rights from their participation in a capital raise and are the proceeds of the raise used in the same manner as the proceeds from traditional securities offerings? So in short, no. They look definitely very different, right? The in traditional capital, you have very established structures around equity.
▶ 2:55:51what are the rights of of shareholders is governed by you know the the corporate laws whatever state you're in digital asset world and with blockchains it looks very it looks very different I think for these folks it can also vary by what the setup is but I think one of the biggest differences is simply that there can more direct engagement through the government that are blockchains uh the tokens that you're holding almost always are going to have a utility and a purpose to it right it's what's being used to
▶ 2:56:21pay for transactions on the network and most importantly it's the incentive mechanism for a network. You cannot have a decentralized you know interaction of all these parties without some sort of incentive mechanism the same way dollars.
▶ 2:56:39So it's definitely very different and it comes back to why we're coming here today and asking and saying yes like a purpose fit structure legislation that that creates a category for this is going to be necessary for us to really have certainty that people need to build. So comparing you know your more traditional pitch deck and disclosures and um you know the the language that investors would have access to through a particular capital raise.
▶ 2:57:07How would you compare that to um to a crypto piece where it it seems like the investor may be doing it at you know 10:00 at night before they go to bed and it's a little bit more cavalier and I I mean is there enough safeguards in place and explanations in place um for you know the more I guess amateur investor that wants to just at least get into the game? Yeah, absolutely. I I think we might have the idea of someone just hitting by on their phone, you know, while laying in bed.
▶ 2:57:37But you also see in this industry a huge number of people again on a decentralized distributed basis really incredible research. They will go through the white paper. They will they will look into this thing. They will check the code. It's all right. These are open source block. The code is free. The gentleman's time the gentleman's time is expired. Um thank you very much. Yeah. Thank you. The gentleman from North Carolina, Mr.
▶ 2:58:00is recognized for five minutes.
▶ 2:58:25Two people that are having a meltdown disruptive and make it a
▶ 2:59:45the gentleman to suspend just a minute. Mr. Moore, um, some of these mics that some of these mics are in. We're going to continue to try to watch on live stream unfortunately aren't able to to hear. So the green mic there we're a little bit of a Wi-Fi connection. Let me the chairman of the house administration. We get something done on this. Go ahead, Mr. Mark. Technology is great when it works.
▶ 3:00:37Thank you, Congressman. Uh, first and foremost, it means that we're seing leadership in the digital assets industry um and all of the next generation of innovation that entails. More critically, we believe that the future of uh everything from uh consumer technology to the global financial system to global capital markets is going to be leveraging this technology in the future.
▶ 3:01:02So, it's not just about seeding, you know, future innovation uh uh over the coming decades, but it's also seeding macro leadership role with respect to the areas that we've tra traditionally been leaders in. Federal in American
▶ 3:01:47United States. Yeah, thank you for the question, Congressman. Um, I think it's critically important. Uh, and I think Mr.
▶ 3:02:12Rathnol said not just for the importance of um you know having consumers be all the things that we've talked about but I think uh the point that was just made is critical that this is really the future of you know capital markets and for the US to continue to be you know the envy of capital markets around the world with respect to um how things you know how collateral has moved and all of the things that are sort of critically important to well functioning markets.
▶ 3:02:40these this bill is the foundation of a lot of that technology that that will be in place. And so for the US to continue to be um you know the leader the capital market leader around the globe this is critically important. I agree with those comments. I there I I've met him there there there is an engineer uh on the way. So we apologize Mr.
▶ 3:03:50The gentleman yields back. It's noted we are in the agriculture uh committee room, not at financial services. So maybe maybe there's no I'm teasing to our good friends uh at egg, but the gremlins are at work. We do have an engineer on the way. The gentleman from Michigan, Mr. Heisen is recognized. Thank you, Chair Style. And uh while uh while this may have started off a little awkwardly, I'm hoping it's we're finishing strong today because this is so important uh what we are dealing with here.
▶ 3:04:20Having been now in Congress, this is my eighth term, having been on the very front end of digital assets discussion for a very long time on this, uh, this day has been long coming and, uh, it's necessary. Um, I, uh, I'm going to try to hit a couple of things here.
▶ 3:04:39um you know many digital assets uh projects reach point where they're no longer reliant on a on a group or an organization but rather their success is contingent on the collective contributions of a dispersed network of users. Uh Mr. Miller, Mr. Rathmol, uh can you address why this is a key point in the development of a of a digital commodity project? Sure. So I think thanks for the question.
▶ 3:05:04I think it's one obviously Uh the current having control over this thing just one organization or one entity to make changes to issue things to create have this just decentralized group of people who are partnered in the co economy
▶ 3:05:35and there's really no way without see it happening. Mr. Thank you, Congressman. Fundamentally, the securities laws are based on the principle of information asymmetries existing out in the marketplace uh where you have a certain set of participants who have specialized information about their company.
▶ 3:06:01Uh and in digital asset projects, especially once you've re achieved decentralization, you should be much more focused on uh market integrity, uh efficient price discovery, um broad-based participation in the markets to ensure that efficient price discovery, um and anti-fraud provisions and the like. And so once you achieve that point at which the token is effectively decentralized, it's critical that you shift your regulatory focus as well.
▶ 3:06:29And it really is changing talking about changing the risk for the holders. Correct. Correct. Yes. Okay. How how should we or how should a regulatory regime for digital assets recognize that The transition is really uh when we think about um those information asymmetries as no longer being a driving force of the value of the asset.
▶ 3:06:53Uh so when an asset is primarily determined it's matured it's mature correct uh when it's primarily determined by supply and demand dynamics um the use on the blockchain network uh security of the blockchain network uh that's that's when you achieve a point at which market integrity is is the primary primary driver and the primary regulatory focus. I stick with you.
▶ 3:07:18Uh I in my various roles on this committee I've been chair and ranking member of the capital markets uh subcommittee which primarily with securities exchange commission um and uh whether it was uh Jay Clayton, Gary Gentler uh over the last number of years I think we saw some very different approaches uh to the use of the SEC and you know the um the Gendler Biden administration chose to regulate digital assets uh by enforcing forcement
▶ 3:07:48and the SEC uh under Trump administration has taken a very different approach. Um you know crypto task force they've they've really had just a different attitude at the SEC. So Mr. Reth can you outline some of the actions that the current SEC has already taken with respect to digital assets and explain the impact that the what this activity has had uh for digital asset projects and the markets that have been built around Absolutely.
▶ 3:08:18Uh I'll I'll highlight three uh quick things very briefly. Uh first is just engagement with industry. Really understanding the concerns of industry and not um having market participants who don't feel like the door is being shut in their face. That's that's very important. Um second is uh really actually putting out um obviously the market structure legislation will be the ultimate driver of how these markets are regulated.
▶ 3:08:44uh but putting out under existing law clear legal analysis and clear legal guidance um that is publicly available to entrepreneurs uh is a really incredible step forward. Um and I think the amount of legal guidance that we've seen and legal analysis we've seen coming out of Corp Finn uh coming out of these broadly um just in the past uh couple weeks has far outpaced what we've seen in the preceding five, six, seven years.
▶ 3:09:11Um, I I'm going to submit some questions uh as well, but if you could give me each one of you a super quick answer on to this question. If Congress um were to not pass a digital asset market structure legislation, what would be your biggest concern? Just give me your top concern if we don't actually get this done. Uh uh the loss of American innovation. Okay. Yeah.
▶ 3:09:40complete loss of competitiveness in the international economy on this. We'll be fighting things out in the courts instead of developing here. Agree with the point on competitiveness and and uh US capital fleeing elsewhere. Okay. That that that's a key. Okay. Mr. continued unchecked fraud and manipulation of markets. All right. Well, with that, Mr. Chairman, I know my time has gone over and I yield back. The the gentleman yields back.
▶ 3:10:09I I want to thank all of our participants. I think what we heard today is the need to move forward on the market structure bill. Uh we began this by trying to have a joint subcommittee hearing between agriculture and financial services. An open public dialogue on incredibly critical and important legislation. Disappointing uh a small number of members chose to protest and walk out.
▶ 3:10:38But what I think we actually saw today was a large number of members from both the majority and the minority side engage in the substance of the topic because that's what the day calls for. And I think in the closing question from my colleague Mr. Heisenga, I think what we actually laid out is failure to act has consequences. And if we fail to act and seize this moment, we will find ourselves in a situation where we're being outco competed by other countries like China.
▶ 3:11:09This is an opportunity for the United States to seize the moment to step up to lay out a framework so that that innovation and development is occurring here in the United States of America and not abroad to provide clarity so that the new inventors, creators, innovators and developers are here and working and finding themselves with their ideas in board in basement and dorm rooms, not in boardrooms and law firms. This is an opportunity for us to seize the moment.
▶ 3:11:39It's disappointing. A small number of individuals chose to put their head in the sand and exit the room and prevent us from having a hearing. But I think today's round table with your testimony with the questions and the comments provided here in this room provide us with a clear path forward. It shows the importance of the market structure legislation introduced this week by chairman French Hill and chairman GT Thompson. And I thank all of you for participating today.
▶ 3:12:08Uh I know there may be some additional questions submitted uh to our uh experts here at the round table. We ask that you would uh provide comments back uh to the committee uh with short notice. And so we appreciate all of you being here today. Uh we thank everyone for their participation and the roundt is